Economic activity in the services sector expanded in November for the 11th consecutive month as the Services PMI® registered 52.7 percent, say the nation's purchasing and supply executives in the latest Services ISM® Report On Business®. The sector has grown in 41 of the last 42 months, with the lone contraction in December 2022.

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 November, the Services PMI® registered 52.7 percent, 0.9 percentage point higher than October’s reading of 51.8 percent. The composite index indicated growth in November for the 11th consecutive month after a reading of 49.2 percent in December 2022, which was the first contraction since May 2020 (45.4 percent). The Business Activity Index registered 55.1 percent; a 1-percentage point increase compared to the reading of 54.1 percent in October. The New Orders Index expanded in November for the 11th consecutive month after contracting in December for the first time since May 2020; the figure of 55.5 percent equals the October reading.

“The Supplier Deliveries Index registered 49.6 percent, 2.1 percentage points higher than the 47.5 percent recorded in October. The index remained in contraction territory for the second consecutive month, indicating that supplier delivery performance was ‘faster’ in contrast to the ‘slowing’ status in September. In the last 10 months, the average reading of 48.1 percent (with a low of 45.8 in March) reflects the fastest supplier delivery performance since June 2009, when the index registered 46 percent. (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 registered 58.3 percent in November, a 0.3-percentage point decrease from the October reading of 58.6 percent. The Inventories Index returned to growth in November, registering 55.4 percent, an increase of 5.9 percentage points from October’s figure of 49.5 percent. The Inventory Sentiment Index (62.2 percent, up 7.8 percentage points from October’s reading of 54.4 percent) expanded for the seventh consecutive month. The Backlog of Orders Index contracted in November and registered 49.1 percent, a 1.8-percentage point decrease compared to the October reading of 50.9 percent.

“Fifteen industries reported growth in November. The Services PMI®, by being above 50 percent for the 11th month after a single month of contraction and a prior 30-month period of expansion, continues to indicate sustained growth for the sector, and at a slightly faster rate in November.”

Nieves continues, “The services sector had a slight uptick in growth in November, attributed to the increase in business activity and slight employment growth. Respondents’ comments vary by both company and industry. There is continuing concern about inflation, interest rates and geopolitical events. Rising labor costs and labor constraints remain employment-related challenges.”

INDUSTRY PERFORMANCE

The 15 services industries reporting growth in November — listed in order — are: Agriculture, Forestry, Fishing & Hunting; Health Care & Social Assistance; Real Estate, Rental & Leasing; Arts, Entertainment & Recreation; Transportation & Warehousing; Retail Trade; Utilities; Accommodation & Food Services; Other Services; Management of Companies & Support Services; Finance & Insurance; Public Administration; Construction; Wholesale Trade; and Educational Services. The three industries reporting a decrease in the month of November are: Information; Mining; and Professional, Scientific & Technical Services.

WHAT RESPONDENTS ARE SAYING

- “Restaurant sales and traffic trends are consistent with the previous month and at our annual seasonal lows — should pick up again in December. We continue to trend positive to pre-pandemic and last year.” [Accommodation & Food Services]
- “Opportunities across the construction industry remains strong. The labor market for skilled trades workers is tight.” [Construction]
- “Supplies and merchandise are holding steady.” [Educational Services]
- “Business conditions remain steady to the end of 2023. Annual cost escalations are a bit higher than planned, more than 5 percent versus 3 percent due to overall economic conditions and concerns.” (Finance & Insurance)
- “Signs of recovery are on the horizon — (profit) margins remain tight, but revenue is improving and labor appears to be stabilizing. Supply chains are operating well, but a few major manufacturers continue to show signs of constraints that have persisted for some time. Capital investment remains constrained; however, optimism has returned for a turnaround in calendar year 2024.” [Health Care & Social Assistance]
- “There are fewer new projects in comparison to last month and November 2022. Customers are not requesting quotes for new services.” [Information]
- “Customers are conservative in spending, so competition to maintain market share is tight.” [Management of Companies & Support Services]
- “Fourth-quarter revenues lower than projected. Seeing negative revenues trend into the first quarter of the new year. We remain positive yet concerned about 2024.” [Professional, Scientific & Technical Services]
- “Prices for most items increasing, but only slightly. Increase in pricing for services much more noticeable and impactful on the organization.” [Public Administration]
- “Candidate expectations during the hiring process have made staffing up more difficult.” [Retail Trade]
- “Solid activity heading into the final stretch of the fourth quarter.” [Transportation & Warehousing]
- “Labor, equipment and material price escalation requests are increasing, both through existing contracts as well as re-pricing of markets via requests for proposal.” [Utilities]
- “A comparably flat month of business activity — no major swings one way or the other. Inventories in our extended supply chain look healthy, and fill rates are improving.” [Wholesale Trade]