Economic activity in the services sector grew in October for the 29th month in a row — with the Services PMI® registering 54.4 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 October, the Services PMI® registered 54.4 percent, 2.3 percentage points lower than September’s reading of 56.7 percent. This is the lowest reading since May 2020, when the index registered 45.2 percent. The Business Activity Index registered 55.7 percent, a decrease of 3.4 percentage points compared to the reading of 59.1 percent in September. The New Orders Index figure of 56.5 percent is 4.1 percentage points lower than the September reading of 60.6 percent.

“The Supplier Deliveries Index registered 56.2 percent, 2.3 percentage points higher than the 53.9 percent reported in September. (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.)

“After five straight months of decreases, the Prices Index was up 2 percentage points in October, to 70.7 percent. Services businesses still continue to struggle to replenish their stocks, as the Inventories Index contracted for the fifth consecutive month; the reading of 47.2 percent is up 3.1 percentage points from September’s figure of 44.1 percent. The Inventory Sentiment Index (46.4 percent, down 0.8 percentage point from September’s reading of 47.2 percent) contracted for the third month in a row.

“According to the Services PMI®, 16 industries reported growth. The composite index indicated growth for the 29th consecutive month after a two-month contraction in April and May 2020. Growth continues at a slower rate for the services sector, which has expanded for all but two of the last 153 months. The sector had a pullback in growth for the second consecutive month in October due to decreases in business activity, new orders and employment.”

Nieves continues, “Supplier deliveries continued to slow, at a faster rate in October. Based on comments from Business Survey Committee respondents, growth rates and business levels have cooled. There are still challenges in hiring qualified workers, and due to uncertainty regarding economic conditions, some companies are holding off on backfilling open positions. Supply chain and logistical issues persist but are not as encumbering as they were earlier in the year.”
INDUSTRY PERFORMANCE

The 16 services industries reporting growth in October — listed in order — are: Mining; Agriculture, Forestry, Fishing & Hunting; Arts, Entertainment & Recreation; Transportation & Warehousing; Accommodation & Food Services; Construction; Utilities; Other Services; Information; Retail Trade; Professional, Scientific & Technical Services; Educational Services; Finance & Insurance; Public Administration; Health Care & Social Assistance; and Wholesale Trade. The two industries reporting a decrease in the month of October are: Management of Companies & Support Services; and Real Estate, Rental & Leasing.
WHAT RESPONDENTS ARE SAYING

“Despite the negative inflation news, higher gas prices and concerns of a recession, our restaurant sales have been resilient during what is typically a seasonal slump. We are positive to 2019 (pre-coronavirus pandemic), and traffic is down only about 4 percent, so it’s recovering. Staffing and supply chain challenges are improving, (and we are) seeing some decline in key commodities.” [Accommodation & Food Services]
“Business remains tepid. We have a general concern that sales volumes are trending down as buyers communicate that they’re planning to buy only what they need for immediate sales.” [Agriculture, Forestry, Fishing & Hunting]
“Customers are starting to delay projects and/or entering smaller-scale scopes of work. We believe this is a continuation of an uncertain economic environment.” [Construction]
“There are supply chain challenges for some paper- and tech-related products.” [Educational Services]
“Shortages and delays stabilizing. Labor availability and patient volume continue to be a challenge.” [Health Care & Social Assistance]
“Electronic components lead times are becoming longer, pushing out almost a year. Not seeing much change in pricing based on inflation pressures at this point, but we expect to see changes after the first of the year. Business volume remains strong.” [Other Services]
“As we prepare for a recession, our stakeholders, clients and vendors are all tightening their belts and reducing new spend. We are focusing on strategic renewals and expanding only where necessary with our closest vendor partners for our most critical tech projects.” [Professional, Scientific & Technical Services]
“Prices seem to continue increasing for commodities, including plumbing, flooring materials, floor adhesives, door locks, and bedroom and bathroom doors. Delays in delivery have increased after leveling off in the middle of the year.” [Real Estate, Rental & Leasing]
“We are in the final preparations for a successful holiday, despite lower sales. Labor is more available this year, and supply chain delays seem caught up for now.” [Retail Trade]
“It has become more challenging to maintain our level of service, due to increased demand, extended supplier lead times and the hyper-competitive employment market.” [Transportation & Warehousing]
“We are experiencing a bullwhip of oversupply on some goods … while still desperately short on other goods. The market is recovering very inconsistently.” [Wholesale Trade]