Economic activity in the services sector expanded in September for the ninth consecutive month as the Services PMI® registered 53.6 percent, say the nation's purchasing and supply executives in the latest Services ISM® Report On Business®. The sector has grown in 39 of the last 40 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 September, the Services PMI® registered 53.6 percent, 0.9 percentage point lower than August’s reading of 54.5 percent. The composite index indicated growth in September for the ninth consecutive month after a reading of 49.2 percent in December 2022, which was the first contraction since June 2020 (45.4 percent). The Business Activity Index registered 58.8 percent, a 1.5-percentage point increase compared to the reading of 57.3 percent in August. The New Orders Index expanded in September for the ninth consecutive month after contracting in December for the first time since May 2020; the figure of 51.8 percent is 5.7 percentage points lower than the August reading of 57.5 percent.

“The Supplier Deliveries Index registered 50.4 percent, 1.9 percentage point higher than the 48.5 percent recorded in August. The index is in expansion (or “slowing”) territory for the first time since November 2022, when it registered 53.8 percent. Still, the average reading of 48.1 percent in the last seven months (with a low of 45.8 percent 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 58.9 percent in September, matching its August reading. The Inventories Index expanded in September for the fifth consecutive month, after one month of contraction preceded by two months of growth and eight months of contraction from June 2022 to January 2023; the reading of 54.2 percent is down 3.5 percentage points from August’s figure of 57.7 percent. The Inventory Sentiment Index (54.8 percent, down 6.7 percentage points from August’s reading of 61.5 percent) expanded for the fifth consecutive month after one month of contraction preceded by four months of growth, with a four-month period of contraction from August to November 2022. The Backlog of Orders Index registered 48.6 percent, a 6.8-percentage point increase compared to the August figure of 41.8 percent.

“Thirteen industries reported growth in September. The Services PMI®, by being above 50 percent for the ninth month after a single month of contraction and a prior 30-month period of expansion, continues to indicate sustained growth for the sector. The composite index has indicated expansion for all but three of the previous 163 months.”

Nieves continues, “There has been a slight pullback in the rate of growth for the services sector, which is attributed to slower rates of growth in the New Orders and Employment indexes. The majority of respondents remain positive about business conditions; moreover, some respondents indicated concern about potential headwinds.”

INDUSTRY PERFORMANCE

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

WHAT RESPONDENTS ARE SAYING

“Prices are coming down across the board for most commodities. However, there are still a few areas where supply is not available on a consistent basis, or what is being delivered is not to specifications.” [Accommodation & Food Services]
“Conditions remain favorable for mechanical contractors. New construction projects continue to launch. We are still seeing opportunities for cost reductions across many commodities. Inventory levels on finished goods remain strong.” [Construction]
“The market is stable at this time.” [Educational Services]
“I think the outlook of our company and the industry is a slow but steady improvement — from a plethora of unknowns to a daily sense of being able to manage the rigors of the supply chain.” [Health Care & Social Assistance]
“The market for the industry keeps looking positive, although there is a higher concentration of new projects at emerging markets. Opportunities in traditional markets like the U.S. or Europe have decreased, and my organization has managed to maintain or renew contracts that started two or three years ago.” [Information]
“Bank and leasing company volume seems to be falling as credit tightens, thus causing a slowdown in related services industries. Bankruptcy work is picking up.” [Management of Companies & Support Services]
“The fourth quarter is looking better than forecast, which is good because the third quarter of 2023 was below plan. Our customers are cautiously optimistic for a solid domestic performance, despite troubles in select foreign markets.” [Professional, Scientific & Technical Services]
“Business is ramping up in preparation for the holiday season. Our supply chain is strong.” [Retail Trade]
“Higher level of orders in past month. Business activity is stabilizing to last year’s numbers.” [Transportation & Warehousing]
“Other than increases in fuel costs and some materials, activity and sales have been relatively stable month over month. However, a seasonal decrease in water sales is anticipated as cooler temperatures set in. Regional housing development projects continue to come online, in spite of higher interest rates.” [Utilities]
“Suppliers’ lead times are approaching ‘normal.’ Electronic equipment containing chips continues to be on allocation.” [Wholesale Trade]