ISM Services Expand for Eighth Straight Month

The Institute of Supply Management (ISM) has released its August services purchasing managers' index (PMI). The headline composite index is at 54.5, which was above the forecast of 52.5. The latest reading marks the eighth straight month the index has been expansion territory.

Here is the report summary:

(Tempe, Arizona) — Economic activity in the services sector expanded in August for the eighth consecutive month as the Services PMI® registered 54.5 percent, say the nation's purchasing and supply executives in the latest Services ISM® Report On Business®. The sector has grown in 38 of the last 39 months, with the lone contraction in December of last year.

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 54.5 percent, 1.8 percentage points higher than July’s reading of 52.7 percent. The composite index indicated growth in August for the eighth consecutive month after a reading of 49.2 percent in December, which was the first contraction since June 2020 (45.4 percent). The Business Activity Index registered 57.3 percent, a 0.2-percentage point increase compared to the reading of 57.1 percent in July. The New Orders Index expanded in August for the eighth consecutive month after contracting in December for the first time since May 2020; the figure of 57.5 percent is 2.5 percentage points higher than the July reading of 55 percent.

“The Supplier Deliveries Index registered 48.5 percent, 0.4 percentage point higher than the 48.1 percent recorded in July. In the last six months, the average reading of 47.7 percent (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 was up 2.1 percentage points in August, to 58.9 percent. The Inventories Index expanded in August for the fourth 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 57.7 percent is up 7.3 percentage points from July’s figure of 50.4 percent. The Inventory Sentiment Index (61.5 percent, up 4.9 percentage points from July’s reading of 56.6 percent) expanded for the fourth 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 41.8 percent, a 10.3-percentage point decrease compared to the July figure of 52.1 percent.

“Thirteen industries reported growth in August. The Services PMI®, by being above 50 percent for the eighth 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 162 months.”

Nieves continues, “There has been an increase in the rate of growth for the services sector, reflected by increases in all four subindexes that directly factor into the composite Services PMI® and faster supplier deliveries. Sentiment among Business Survey Committee respondents varies by industry; however, the majority of panelists are positive about business and economic conditions.” [Source]

Unlike its much older kin, the ISM manufacturing series, there is relatively little history for ISM's non-manufacturing data, especially for the headline composite Index, which dates from 2008. The chart below shows the non-manufacturing composite.

ISM Services PMI