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ISM Non-Manufacturing Index dropped to 51.2% in March 2023
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Economic activity in the services sector expanded in March for the third consecutive month as the Services PMI® registered 51.2 percent, say the nation's purchasing and supply executives in the latest Services ISM® Report On Business®. The sector has grown in 33 of the last 34 months, with the lone contraction in December.
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 March, the Services PMI® registered 51.2 percent, 3.9 percentage points lower than February’s reading of 55.1 percent. The composite index indicated growth in March for the third consecutive month after a reading of 49.2 percent in December, the first contraction since May 2020 (45.4 percent). The Business Activity Index registered 55.4 percent, a 0.9-percentage point decrease compared to the reading of 56.3 percent in February. The New Orders Index expanded in March for the third consecutive month after contracting in December for the first time since May 2020; the figure of 52.2 percent is 10.4 percentage points lower than the February reading of 62.6 percent.
“The Supplier Deliveries registered 45.8 percent, 1.8 percentage points lower than the 47.6 percent recorded in February. In the last two months, the index has reflected the fastest supplier delivery performance since April 2009, when it registered 45.5 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 was down 6.1 percentage points in March, to 59.5 percent. The Inventories Index grew in March for the second consecutive month after contracting for eight months in a row; the reading of 52.8 percent is up 2.2 percentage points from February’s figure of 50.6 percent. The Inventory Sentiment Index (57.9 percent, up 2.6 percentage points from February’s reading of 55.3 percent) expanded for the fourth consecutive month after a four-month period of contraction.
“Thirteen industries reported growth in March. The Services PMI®, by being above 50 percent for a third 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 158 months.”
Nieves continues, “There has been a pullback in the rate of growth for the services sector, attributed mainly to (1) a cooling off in the new orders growth rate, (2) an employment environment that varies by industry and (3) continued improvements in capacity and logistics, a positive impact on supplier performance. The majority of respondents report a positive outlook on business conditions.”
INDUSTRY PERFORMANCE
The 13 services industries reporting growth in March — listed in order — are: Other Services; Arts, Entertainment & Recreation; Educational Services; Accommodation & Food Services; Public Administration; Mining; Management of Companies & Support Services; Agriculture, Forestry, Fishing & Hunting; Professional, Scientific & Technical Services; Utilities; Health Care & Social Assistance; Construction; and Information. The five industries reporting a decrease in the month of March are: Finance & Insurance; Wholesale Trade; Real Estate, Rental & Leasing; Transportation & Warehousing; and Retail Trade.
WHAT RESPONDENTS ARE SAYING
- "Restaurant sales remain favorable compared to pre-pandemic trends. Traffic is recovering and nearly flat. We are optimistic about the coming months and have invested in building remodeling and equipment, as well as a new back office and POS (point of sale) system.” [Accommodation & Food Services]
- "Sales continue to increase even as interest rates moderately increase. Most suppliers feel their supply chains are back to normal, with inventories climbing and delivery times improving. (We) fear this will have a detrimental effect in a six- to 12-month time frame.” [Construction]
- "Still experiencing shortages in general labor positions amid demand for higher entry-level wages.” [Educational Services]
- "Close of first quarter business conditions are steady. Already projecting out for 2024. Economic uncertainty is still a concern, and interest rates are continuing to be monitored closely.” [Finance & Insurance]
- "Although patient volumes and revenues continue to be strong, labor and inflationary pressures have led to higher operating expenses, exceeding revenues and resulting in negative operating margins. Supply chains issues are easing, leading to fewer stockouts, though inventory levels are not as healthy as preferred. Enjoying continuous improvement in (lead times), labor, price stability and product reliability. The near-term forecast is optimistic.” [Health Care & Social Assistance]
- "Slowdown in the economy is leading to reduced expenditure amounts.” [Information]
- "Our company continues to have a cautious approach to the future. Continuing uncertainty regarding inflation and oil and gas regulations.” [Management of Companies & Support Services]
- "There continues to be uncertainty in the market regarding future investments. Interest rate hikes seem to have done little to slow down consumer spending. The likelihood of a mild slowdown in the second half of 2023 or 2024 is still pretty high. Layoffs will continue.” [Professional, Scientific & Technical Services]
- "Increased stability in logistics and transportation services have helped stabilize the flow of goods and materials.” [Public Administration]
- "Diesel fuel (prices) down 16 percent and unleaded down 9 percent from a month ago. Other than composite materials, most materials are readily available. Sales have dipped only slightly during this above-normal rainy season and are still consistent with normal winter sales.” [Utilities]
- "Supply is starting to stabilize. Prices are coming down but in small increments. Food prices remain high, and availability continues to be a challenge.” [Transportation & Warehousing]
Posted: April 5, 2023 Wednesday 10:00 AM