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The key ISM July US services index soared to an all time high 64.1 vs 60.1% in June, the fourteenth straight month of growth for the services sector which accounts for over 80% of the US GDP.  Services industries pent-up demand with many supply chain disruptions bringing inflation risk and challenges with labor and product.

US ISM Services July 2021

Note this ISM report has only been out since 2008 with the ISM noting some of the sub-indexes could be estimated back to 1997 and this would still be the best reading of all time.

ISM Non-Manufacturing Index for July

The dividing line between expansion and contraction is 50.0%.

  • Rose to 64.1% v consensus 60.5%) from 60.1% in June.
  • The July reading is a record high, eclipsing the former high of 64.0% seen in May
  • Fourteenth straight month of growth for the services sector.
  • Unleashing of pent-up demand, which is running headlong into supply challenges on the labor and product fronts.
  • The New Orders Index rose to 63.7% from 62.1%.
  • The Production Index jumped to 67.0% from 60.4%.
  • The Prices Index increased to 82.3% from 79.5%, the highest level since September 2005.
  • The Employment Index moved up to 53.8% from 49.3%.
  • The Supplier Deliveries Index increased to 72.0% from 68.5%.
  • The Backlog of Orders Index slipped to 63.5% from 65.8%.

Comments in the report:

The July Services PMI® data indicates the delta variant has not abated pent-up demand or significantly slowed the full-reopening process for businesses, Anthony Nieves, CPSM, C.P.M., A.P.P., CFPM, Chair of the Institute for Supply Management® Services Business Survey Committee, told a conference call of reporters on Wednesday.

However, he added, it’s a threat — especially considering that July sector growth could have been even stronger if not for labor shortages, due in part to continuing pandemic-related hesitancy among prospective workers

. “Right now, it doesn't seem to be negatively impacting business, but if there are more hospitalizations, that will cause some pullback on business levels,” Nieves said. “From this report and the all-time index high, it seems like the economy is pushing forward hard. (The delta variant) is not impacting business, but the potential is there.”

Wrote a Business Survey Committee respondent:

“Trying to aggressively fill positions. (However, it is) very difficult to get positions filled. (We are) still using agency clinical staffing. Looks like people don’t want to work in the lower support service areas.”

“(Those numbers) are directly correlated to the capacity issues in the supply chain,” Nieves said. “Not just with material and labor shortages, but also the modes of transportation — port congestion, slower rail deliveries and (a lack of) available trucks and drivers. So, a lot of industries are using up inventory faster than they can replenish it.”

He continued, “Inflation is coming into the picture more and more, but it appears to be transitory, due to the lack of balance between supply demand. It could be some time before the supply catches up.”

Source: ISM

From The TradersCommunity News Desk

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