The Institute for Supply Management (ISM) released its March Services Purchasing Managers' Index (PMI), with the headline composite index at 50.8—below the forecast of 53.0. This marks the ninth consecutive month of expansion but the slowest growth since June 2024.
Here is an excerpt from the report summary:
Miller continues, “March saw drops in the readings of three (New Orders, Employment and Supplier Deliveries) of the four subindexes that directly factor into the Services PMI®. Only Business Activity saw an increase over February’s reading. Employment was the only one of these subindexes to drop into contraction territory after three straight months with all four in expansion. There has been a significant increase this month in the number of respondents reporting cost increases due to tariff activity. Despite an increase in comments on tariff impacts and continuing concerns over potential tariffs and declining governmental spending, there was a close balance in near-term sentiment, between panelists with good outlooks and those seeing or expecting declines.”
Here is a table showing the PMI's components.
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.
The more interesting and useful sub-component is the non-manufacturing business activity Index. The latest data point for March is 55.9, up from the previous month.
For a diffusion index, this can be an extremely volatile indicator, hence the addition of a six-month moving average to help us visualize the short-term trends.
Theoretically, this indicator should become more useful as the time frame of its coverage expands. Manufacturing may be a more sensitive barometer than non-manufacturing activity, but we are increasingly a services-oriented economy, which explains our intention to keep this series on the radar.
ISM PMI Comparison: Manufacturing vs. Services
The next chart offers a comparison between the two Purchasing Managers' Indexes provided by the Institute for Supply Management. See the latest update on the Manufacturing PMI here.
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