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ISM Non-Manufacturing Index increased to 56.9% in August 2022
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Economic activity in the services sector grew in August for the 27th month in a row — with the Services PMI® registering 56.9 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 August, the Services PMI® registered 56.9 percent, 0.2 percentage point higher than July’s reading of 56.7 percent. The Business Activity Index registered 60.9 percent, an increase of 1 percentage point compared to the reading of 59.9 percent in July. The New Orders Index figure of 61.8 percent is 1.9 percentage points higher than the July reading of 59.9 percent.
“The Supplier Deliveries Index registered 54.5 percent, 3.3 percentage points lower than the 57.8 percent reported in July. (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 fourth consecutive month in August, down 0.8 percentage point to 71.5 percent. Despite an improvement in inventory levels, services businesses still continue to struggle to replenish their stocks, as the Inventories Index contracted for the third consecutive month; the reading of 46.2 percent is up 1.2 percentage points from July’s figure of 45 percent. The Inventory Sentiment Index (47.1 percent, down 3 percentage points from July’s reading of 50.1 percent) moved back into contraction territory in August.”
Nieves continues, “According to the Services PMI®, 14 industries reported growth. The composite index indicated growth for the 27th consecutive month after a two-month contraction in April and May 2020. Growth continues — at a slightly faster rate — for the services sector, which has expanded for all but two of the last 151 months. The services sector had a slight uptick in growth for the month of August due to increases in business activity, new orders and employment. Based on comments from Business Survey Committee respondents, there are some supply chain, logistics and cost improvements; however, material shortages remain a challenge. Employment improved slightly despite a restricted labor market.”
INDUSTRY PERFORMANCE
The 14 services industries reporting growth in August — listed in order — are: Mining; Real Estate, Rental & Leasing; Utilities; Construction; Educational Services; Information; Transportation & Warehousing; Wholesale Trade; Health Care & Social Assistance; Public Administration; Finance & Insurance; Management of Companies & Support Services; Professional, Scientific & Technical Services; and Other Services. The two industries reporting a decrease in the month of August are: Agriculture, Forestry, Fishing & Hunting; and Arts, Entertainment & Recreation.
WHAT RESPONDENTS ARE SAYING
“Starting to see some cost pressures relief; the overall supply environment is healthy.” [Accommodation & Food Services]
“Some pullback on projects by clients, but activity is still strong for our company. This has alleviated some labor availability issues. Generally, there has been improvement in lead times and prices, but still longer and higher, respectively, than in 2021.” [Construction]
“Supply chain issues continue to significantly extend lead times, with a shortage of materials to build scientific equipment and machinery contributing to the issue. Purchases need to be made three to six months in advance, in addition to the normal lead time. As for the higher education industry, it is breaking records for student applicants.” [Educational Services]
“The supply chain and labor continue to be significant issues. Repair parts are nonexistent. Lead times for durable goods are extended, and the less-expensive, mass-produced products are breaking at increased rates — no QC (quality control). The FDA (U.S. Food and Drug Administration) must be reeling because we have been reporting sometimes daily. I’m concerned that a certain percentage of faulty products are probably discarded, which adds to the cost of doing business. Surgery and other hospital products cannot be culled, so it’s a complete loss — if they are red-bagged, that is another cost.” [Health Care & Social Assistance]
“The supply chain challenges affect a portion of our buys as they include products and components made outside of the U.S. that are subject to shipping delays and other issues.” [Management of Companies & Support Services]
“COVID-19 still affecting many businesses. Also, there is a labor shortage.” [Professional, Scientific & Technical Services]
“Lingering concerns about inflation and price increases. Still having difficulties hiring staff to fill many positions.” [Public Administration]
“No major changes. Concerns about the macroeconomic climate and consumer confidence.” [Retail Trade]
“Very long lead times from major equipment — Original Equipment Manufacturers (OEMs). Commodity price escalation appears to be leveling.” [Utilities]
“Business is pretty steady month to month, but we expect seasonal supply increase by September that will moderate prices.” [Wholesale Trade]
Posted: September 6, 2022 Tuesday 10:00 AM