ISM Non-Manufacturing Activity Slows for Third Straight month in June

The ISM Non-Manufacturing Index for June fell to 55.3% (consensus 54.2%) from 55.9% in May, slowing for the third straight month as businesses continued to wrestle with pricing pressures, supply chain issues, and labor supply constraints. The 12-month average is 60.80 percent, which reflects consistently strong growth in the services sector. The June composite index indicated growth for the 25th consecutive month after a two-month contraction in April and May 2020. but it is the lowest reading since May 2020.

via Cheatsheet

The dividing line between expansion and contraction is 50.0

“The Supplier Deliveries Index registered 61.9 percent, 0.6 percentage point higher than the 61.3 percent reported in May. (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 dropped for the second consecutive month in June, decreasing 2 percentage points to 80.1 percent. Services businesses continue to struggle to replenish inventories, as the Inventories Index contracted for the first time since January 2022; the reading of 47.5 percent is down 3.5 percentage points from May’s figure of 51 percent. The Inventory Sentiment Index (46.2 percent, up 1.7 percentage points from May’s reading of 44.5 percent) contracted in June for the fourth consecutive month, indicating that inventories are in ‘too low’ territory and insufficient for current business requirements.”

– Anthony Nieves, CPSM, C.P.M., A.P.P., CFPM, Chair of the Institute for Supply Management

Highlights

  • The New Orders Index fell to 55.6% from 57.6%.
  • The Production Index rose to 56.1% from 54.5%.
  • The Prices Index dropped to 80.1% from 82.1%.
  • The Employment Index decreased to 47.4% from 50.2%.
  • The Supplier Deliveries Index edged up to 61.9% from 61.3%.
  • The Backlog of Orders Index jumped to 60.5% from 52.0%.

WHAT RESPONDENTS ARE SAYING

  • “Supply chain and supplier reliability continues to improve for most of our key food and packaging needs. Equipment still (experiencing) typical long delays. Staffing employment challenges have resurfaced, and costs have dramatically increased on core needs, led by soybean oil products. Rise in diesel fuel affecting almost everything.” [Accommodation & Food Services]
  • “(Interest) rate increases have slowed sales but have not helped with supply challenges yet.” [Construction]
  • “While activity dropped 2 percent from the previous month, activity volume was 47 percent higher compared to May 2021.” [Educational Services]
  • “It seems like everyone is jumping on the bandwagon (of) raising prices under the guise of inflation, cost of energy and shortages. Costs on even software renewals have gone up between 5 and 10 percent. This is getting out of control, and we need to be diligent in researching the cause of rising prices on every transaction.” [Public Administration]
  • “The shutdowns in China due to the zero-COVID policy have adversely impacted our supply chain.” [Health Care & Social Assistance]
  • “Demand has softened across consumer product lines, channels and brands over the last year, to levels below those forecast earlier this year. Adjusting all outlooks down for the rest of year. The (Shanghai) omicron slowdown had an impact, but activity is slowly coming back.” [Information]
  • “Energy services sector demand and activity remains strong.” [Mining]
  • “Consumers are shifting purchases away from our discretionary products to essentials. Inflation is definitely taking a bite from our sales, and mall traffic is far below the norm, potentially due to inflation, a need for more disposable income on essentials and less willingness to drive to malls. E-commerce sales will be going up again.” [Retail Trade]
  • “Despite higher inflation and energy costs, demand and business activity continue to be at record highs, with little sign of a slowdown.” [Utilities]
  • “Business continues to stay steady amid rising interest rates, a lack of labor, inflation, transportation problems and high gas/diesel prices. Outlook is measured due to economic headwinds.” [Wholesale Trade]

COMMODITIES REPORTED UP/DOWN IN PRICE AND IN SHORT SUPPLY

Commodities Up in Price

Aluminum Products (7); Chemicals (3); Chicken (10); Construction Materials (2); Diesel Fuel (19); Electrical Components (17); Electronic Components (7); Food and Beverages (3); Food Products (4); Fuel (18); Fuel Related Products (4); Gasoline (19); Hotel Rates (2); Janitorial Supplies; Lab Supplies; Labor (19); Labor — Temporary (5); Logistics Services; Paint; Plastic Products (11); Resin (2); Steel Products (18); Transformers; Travel (2); and Wire Cable.

Commodities Down in Price

Cleaning Supplies; Lumber; Oriented Strand Board (OSB); and Polyvinyl Chloride (PVC) Products.

Commodities in Short Supply

Appliances (4); Baby Formula (2); Contrast Media (2); Diesel Fuel (2); Electrical Components (3); Electronic Components (7); Garage Doors; Lab Supplies; Labor (11); Microchips (2); Needles and Syringes (6); Paper Products (4); Sugar; and Transformers (2).

Note: The number of consecutive months the commodity is listed is indicated after each item. *Indicates both up and down in price.


SERVICES PMI® HISTORY

Month Services PMI®

  • Jun 2022 55.3
  • May 2022 55.9
  • Apr 2022 57.1
  • Mar 2022 58.3
  • Feb 2022 56.5
  • Jan 2022 59.9
  • Dec 2021 62.3
  • Nov 2021 68.4
  • Oct 2021 66.7
  • Sep 2021 62.6
  • Aug 2021 62.2
  • Jul 2021 64.1
  • Jun 2021 60.7

Average for 12 months – 60.8
High – 68.4
Low – 55.3


Business Activity

The 15 industries reporting an increase in business activity for the month of June — listed in order — are: Management of Companies & Support Services; Construction; Other Services; Accommodation & Food Services; Arts, Entertainment & Recreation; Mining; Professional, Scientific & Technical Services; Utilities; Finance & Insurance; Wholesale Trade; Educational Services; Health Care & Social Assistance; Information; Transportation & Warehousing; and Public Administration. No industry reported a decrease in business activity for the month of June.

New Orders

Thirteen industries reported growth of new orders in June, in the following order: Accommodation & Food Services; Mining; Management of Companies & Support Services; Other Services; Arts, Entertainment & Recreation; Transportation & Warehousing; Real Estate, Rental & Leasing; Utilities; Health Care & Social Assistance; Wholesale Trade; Finance & Insurance; Professional, Scientific & Technical Services; and Public Administration. The two industries reporting a decrease in new orders in June are: Construction; and Educational Services.

Employment

The seven industries reporting an increase in employment in June — listed in order — are: Mining; Construction; Wholesale Trade; Other Services; Professional, Scientific & Technical Services; Public Administration; and Health Care & Social Assistance. The five industries reporting a decrease in employment in June are: Real Estate, Rental & Leasing; Agriculture, Forestry, Fishing & Hunting; Accommodation & Food Services; Finance & Insurance; and Educational Services. Six industries reported no change in June.

Supplier Deliveries

The 16 industries reporting slower deliveries in June — listed in order — are: Agriculture, Forestry, Fishing & Hunting; Real Estate, Rental & Leasing; Retail Trade; Public Administration; Utilities; Arts, Entertainment & Recreation; Health Care & Social Assistance; Construction; Transportation & Warehousing; Information; Management of Companies & Support Services; Other Services; Professional, Scientific & Technical Services; Finance & Insurance; Educational Services; and Wholesale Trade. No industry reported faster deliveries in June.

Inventories

The eight industries reporting an increase in inventories in June — listed in order — are: Mining; Arts, Entertainment & Recreation; Accommodation & Food Services; Construction; Finance & Insurance; Other Services; Wholesale Trade; and Utilities. The seven industries reporting a decrease in inventories in June — listed in order — are: Real Estate, Rental & Leasing; Agriculture, Forestry, Fishing & Hunting; Information; Educational Services; Public Administration; Health Care & Social Assistance; and Professional, Scientific & Technical Services.

Prices

All 18 services industries reported an increase in prices paid during the month of June, in the following order: Arts, Entertainment & Recreation; Mining; Transportation & Warehousing; Public Administration; Retail Trade; Accommodation & Food Services; Educational Services; Wholesale Trade; Information; Professional, Scientific & Technical Services; Real Estate, Rental & Leasing; Finance & Insurance; Construction; Utilities; Health Care & Social Assistance; Management of Companies & Support Services; Other Services; and Agriculture, Forestry, Fishing & Hunting.

Backlog of Orders

The 10 industries reporting an increase in order backlogs in June — listed in order — are: Management of Companies & Support Services; Real Estate, Rental & Leasing; Utilities; Professional, Scientific & Technical Services; Information; Educational Services; Public Administration; Construction; Finance & Insurance; and Health Care & Social Assistance. The four industries reporting a decrease in order backlogs in June are: Agriculture, Forestry, Fishing & Hunting; Retail Trade; Mining; and Wholesale Trade.

New Export Orders

The six industries reporting an increase in new export orders in June — listed in order — are: Real Estate, Rental & Leasing; Arts, Entertainment & Recreation; Mining; Utilities; Professional, Scientific & Technical Services; and Wholesale Trade. The four industries reporting a decrease in new export orders in June are: Construction; Educational Services; Information; and Transportation & Warehousing. Eight industries indicated no change in new export orders in June

Imports

The four industries reporting an increase in imports for the month of June are: Arts, Entertainment & Recreation; Management of Companies & Support Services; Utilities; and Professional, Scientific & Technical Services. The five industries that reported a decrease in imports in June are: Retail Trade; Other Services; Information; Transportation & Warehousing; and Health Care & Social Assistance. Nine industries reported no change in imports in June.

Inventory Sentiment

The three industries reporting sentiment that their inventories were too high in June are: Mining; Wholesale Trade; and Health Care & Social Assistance. The six industries reporting a feeling that their inventories were too low in June — listed in order — are: Real Estate, Rental & Leasing; Accommodation & Food Services; Management of Companies & Support Services; Professional, Scientific & Technical Services; Information; and Utilities. Nine industries reported no change in June.

About Services PMI®

The Services PMI® is a composite index based on the diffusion indexes for four of the indicators with equal weights: Business Activity (seasonally adjusted), New Orders (seasonally adjusted), Employment (seasonally adjusted) and Supplier Deliveries. Diffusion indexes have the properties of leading indicators and are convenient summary measures showing the prevailing direction of change and the scope of change. An index reading above 50 percent indicates that the services economy is generally expanding; below 50 percent indicates that it is generally declining. Supplier Deliveries is an exception. A Supplier Deliveries Index above 50 percent indicates slower deliveries and below 50 percent indicates faster deliveries.

About Institute for Supply Management®

Institute for Supply Management® (ISM®) serves supply management professionals in more than 90 countries. Its 50,000 members around the world manage about US$1 trillion in corporate and government supply chain procurement annually. Founded in 1915 as the first supply management institute in the world, ISM is committed to advancing the practice of supply management to drive value and competitive advantage for its members, contributing to a prosperous and sustainable world. ISM leads the profession through the ISM Report On Business®, its highly regarded certification programs and the ISM Advance™ Digital Platform. This report has been issued by the association since 1931, except for a four-year interruption during World War II.

The next Services ISM® Report On Business® featuring July 2022 data will be released at 10:00 a.m. ET on Wednesdy, August 3, 2022.

Source: ISM World

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