ISM Non-Manufacturing Index: The Institute for Supply Management’s non-manufacturing index increased by 4.4 points month on month (+8.9% m/m) to 53.8 in May 2024.

The ISM non-manufacturing survey measures the rate and direction of change in activity in non-manufacturing industries. Surveys are sent to more than 400 purchasing managers in 18 industries. Survey responses reflect the change in the current month compared with the previous month. A value of 50 is neutral, while less than 50 denotes contracting non-manufacturing activity and greater than 50 denotes expanding activity.

Figure 1 breaks down the composite index and sub-indexes. The business activity sub-index was 61.2, while the imports sub-index was 42.8.

The 13 services industries reporting growth in May — listed in order — are: Real Estate, Rental & Leasing; Health Care & Social Assistance; Other Services; Educational Services; Utilities; Wholesale Trade; Construction; Transportation & Warehousing; Public Administration; Management of Companies & Support Services; Finance & Insurance; Information; and Professional, Scientific & Technical Services. The five industries reporting a decrease in the month of May are: Retail Trade; Agriculture, Forestry, Fishing & Hunting; Arts, Entertainment & Recreation; Accommodation & Food Services; and Mining.

“Residential construction continues to struggle, with high mortgage rates on the for-sale side. Higher interest rates are driving up the cost of capital and making ‘build to rent’ projects harder to pencil. Building season is getting into full swing, but higher lumber prices — especially oriented strand board (OSB) panels — have pinched margins.” [Construction]

At Gerdau, we closely monitor the ISM non-manufacturing index since it is an excellent barometer of the present strength, as well as a window on the likely short-run future, of the U.S. non-manufacturing economy. We have seen that a strengthening non-manufacturing economy translates to improved steel consumption.