By Mark Pender

NEW YORK (MNI) – A slowing in expected year-on-year sales growth
among non-manufacturers offsets what otherwise is a mostly upbeat
semi-annual report that includes better news for jobs, the survey heads
for the Institute For Supply Management told Market News International
Tuesday.

Non-manufacturers are now less confident in sales than they were in
December. The group sees full-year sales at +0.3% vs. their December
forecast of +1.3%.

Anthony Nieves, who heads the ISM’s non-manufacturing side,
attributes the shift lower to 2009 stimulus that he argues distorted the
economic outlook.

“If you pull out the stimulus, such as cash for clunkers for
instance, there wasn’t a whole lot of positive things happening last
year,” Nieves said in a phone interview with MNI.

Despite the downgrade to sales, non-manufacturers now expect to cut
fewer workers this year than they did in December, -0.1% now vs. -0.6%
then.

“This shows you how deep the employment cuts were,” he said,
offering as further evidence the growth trend in GDP vs. what had been
until the first quarter a declining trend for employment.

On the manufacturing side, gains that would have been incremental
during the expansion now seem very large, said Norbert Ore, also
speaking on the phone.

Manufacturers see sales at +6.3% this year vs. December’s forecast
for +5.7%. Though the increase is expected to be centered in the second
half of the year, Ore isn’t convinced this will be reflected in rising
readings for the ISM’s monthly data on production and new orders.

“These indexes have been averaging 60 which is very strong growth.
We can look forward to a continuation of strength but the rate of growth
may slow from where we are now.”

This year’s strength appears to be taking manufacturers by surprise
as they now intend to increase their workforces by 5.2% vs. their
December estimate of +1.5%.

The survey heads said the price outlook is contained with the
greatest pressure having already appeared in the early months of the
year, the customary time when businesses raise prices.

Manufacturers said prices have increased 2.7% year-to-date and they
see only a further 1.1% rise through the rest of the year.
Non-manufacturers report a 0.7% rise so far and see another 1.0% ahead.

** Market News International New York Newsroom 212-669-6430 **

[TOPICS: M$U$$$,M$UEQ$,MAUDS$,MX$$$$]