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ISM Non-Manufacturing Index rose to 56.7% in July 2022
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Economic activity in the services sector grew in July for the 26th month in a row — with the Services PMI® registering 56.7 percent — say the nation’s purchasing and supply executives in the latest Services ISM® Report On Business®.
The report was issued today by Anthony Nieves, CPSM, C.P.M., A.P.P., CFPM, Chair of the Institute for Supply Management® (ISM®) Services Business Survey Committee: “In July, the Services PMI® registered 56.7 percent, 1.4 percentage points higher than June’s reading of 55.3 percent. The Business Activity Index registered 59.9 percent, an increase of 3.8 percentage points compared to the reading of 56.1 percent in June. The New Orders Index figure of 59.9 percent is 4.3 percentage points higher than the June reading of 55.6 percent.
“The Supplier Deliveries Index registered 57.8 percent, 4.1 percentage points lower than the 61.9 percent reported in June. (Supplier Deliveries is the only ISM® Report On Business® index that is inversed; a reading of above 50 percent indicates slower deliveries, which is typical as the economy improves and customer demand increases.)
“The Prices Index decreased for the third consecutive month in July, down 7.8 percentage points to 72.3 percent. Services businesses continue to struggle to replenish inventories, as the Inventories Index contracted for the second consecutive month; the reading of 45 percent is down 2.5 percentage points from June’s figure of 47.5 percent. The Inventory Sentiment Index (50.1 percent, up 3.9 percentage points from June’s reading of 46.2 percent) moved into expansion territory in July after four consecutive months of contraction.”
Nieves continues, “According to the Services PMI®, 13 industries reported growth. The composite index indicated growth for the 26th consecutive month after a two-month contraction in April and May 2020. Growth continues — at a faster rate — for the services sector, which has expanded for all but two of the last 150 months. The slight increase in services sector growth was due to an increase in business activity and new orders. The Employment Index (49.1 percent) contracted for the second consecutive month, and the Backlog of Orders Index decreased 2.2 percentage points, to 58.3 percent. Availability issues with overland trucking, a restricted labor pool, various material shortages and inflation continue to be impediments for the services sector.”
INDUSTRY PERFORMANCE
The 13 services industries reporting growth in July — listed in order — are: Mining; Real Estate, Rental & Leasing; Public Administration; Management of Companies & Support Services; Construction; Educational Services; Other Services; Utilities; Professional, Scientific & Technical Services; Health Care & Social Assistance; Transportation & Warehousing; Wholesale Trade; and Information. The three industries reporting a decrease in the month of July are: Agriculture, Forestry, Fishing & Hunting; Retail Trade; and Finance & Insurance.
WHAT RESPONDENTS ARE SAYING
“Restaurant sales have softened the past few weeks (due to) post-holiday and seasonality factors, but we’re also hearing because of consumer pressures, particularly fuel and food prices. Staffing remains a challenge in some markets. Many of our locations in (Los Angeles County) received news that there could be a return to (indoor) mask mandates.” [Accommodation & Food Services]
“Interest rates have significantly impacted the homebuilding market. Cancellation rates have increased, as homebuyers can no longer afford the monthly payment. Traffic to our communities is down. Inflation has sidelined many would-be buyers.” [Construction]
“Strengthening market overall and signs of improvement. Increased prices putting a strain on fixed budgets. There has been a shift from driving down costs to securing continuity of supply. Higher education is growing, with an increase in applicants.” [Educational Services]
“Business continues to remain below pre-pandemic levels. (Patient) census and visits have increased but seem to have plateaued in the last six-month period.” [Health Care & Social Assistance]
“Can feel the economy weakening. Clients are making appropriate moves in anticipation of a recession.” [Management of Companies & Support Services]
“Hiring demand remains robust in most industry sectors. Tech has had a slowdown in hiring and layoffs. It’s still a candidate’s market, as the number of job openings across all skill levels and positions remains far greater than the number of candidates for those roles.” [Professional, Scientific & Technical Services]
“Rising costs across the board seems to be the big focus now. Fuel and food are the most common focus but it is across the board, and there is pressure of a job market shortage for qualified workers to increase wages and other benefits.” [Public Administration]
“(We are) in inventory reduction mode, attempting to match inventory levels to current lower sales trends.” [Retail Trade]
“Holding steady, but some headwinds are definitely ahead on the economic front. However, supply chain issues appear to be easing, though still not great.” [Utilities]
“Food service remains strong. Retail is softening as the mass is overly concerned about inventory and consumer spending.” [Wholesale Trade]
Posted: August 3, 2022 Wednesday 10:00 AM