US ISM Services Sector Growth Slows in July with New Orders and Employment Pullback

The ISM Non-Manufacturing Index for July pulled back to 52.7% (consensus 53.0%) versus 53.9% in June. The deceleration in July suggests activity in the services sector lost some steam versus the prior month. Services sector activity continued to expand in July, but at a slower pace than the prior month. The majority of respondents remain cautiously optimistic about business conditions and the economy. Business activity for the services sector, which comprises the largest component of U.S. economic activity, has quickly rebounded into growth mode after contracting for the first time since May 2020 in December.

via Cheatsheet

The dividing line between expansion and contraction is 50.0%.

The majority of respondents are mostly positive about business conditions, yet some see headwinds related to inflation and an economic slowdown. This is supportive for the soft-landing scenario.

The sector has grown in 37 of the last 38 months, with the lone contraction in December.

“The Supplier Deliveries Index registered 48.1 percent, 0.5 percentage point higher than the 47.6 percent recorded in June. In the last six months, the average reading of 47.6 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.)

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

Highlights Services PMI July 2023

  • Services PMI index fell to 52.7 from four-month high of 53.9 in June versus forecast 53.
  • Smaller increases for business activity/production (57.1 vs 59.2), New orders (55 vs 55.5), employment (50.7 vs 53.1) Inventories (50.4 vs 55.9)
  • Supplier delivery times were faster (48.1 vs 47.6).
  • Price pressures increased (56.8 vs 54.1)
  • Backlog of orders rebounded (52.1 vs 43.9).
  • Majority of respondents were cautiously optimistic about business conditions and the overall economy.

The 12-month average is 53.50 percent, which reflects consistently strong growth in the services sector.

United States ISM Non-Manufacturing PMI

Nieves continues, “There has been a slight pullback in the rate of growth for the services sector. This is due mostly to the decrease in the rate of growth for business activity, new orders and employment, as well as ongoing faster delivery times. The majority of respondents are cautiously optimistic about business conditions and the overall economy.”


  • “Pricing in food sectors has come down incrementally, but in very small, almost minute percentages. IT labor pricing is still inflated.” [Accommodation & Food Services]
  • “Sales have been steady.” [Construction]
  • “Continuing to see improved case volume in 2023, although July and summer months have flattened a bit as usual. Still scratching and clawing to find savings with economic inflationary pressures.” [Health Care & Social Assistance]
  • “Business remains steady.” [Information]
  • “We are maintaining a cautious approach, although inflation seems to be easing. The overall business environment has stabilized, but tight labor markets are creating ongoing issues.” [Management of Companies & Support Services]
  • “Hiring of employees, temporary workers and consultants continues to be slow as companies remain cautious about increasing fixed and variable expenses during uncertain economic times.” [Professional, Scientific & Technical Services]
  • “Although capacity in transportation services has improved, there are still some industries with lagging lead times for their products.” [Public Administration]
  • “Overall economy is good. Supply chain market is stable. Commodity prices are increasing but at a slower rate. Lead times and deliveries are ideal, and inventories are lower than last quarter. The unemployment rate is at its lowest point in 70 years. Wages continue to grow.” [Retail Trade]
  • “We are still having issues with getting certain materials based on chips, though not nearly as imposing as they were a year ago. Lead times from Europe and in general seem to be improving. There are challenges with suppliers who made changes during the pandemic to spread workloads — they are not as responsive, and this affects lead times.” [Transportation & Warehousing]
  • “Steady, slower growth.” [Finance & Insurance]
  • “High operational expenses continue to put pressure on the business and limit hiring. Supplier costs (are) not coming down as much as expected. Service levels from suppliers continue to improve. Trucking metrics improved.” [Wholesale Trade]


Month Services PMI®

  • Jul 2023 52.7
  • Jun 2023 53.9
  • May 2023 50.3
  • Apr 2023 51.9
  • Mar 2023 51.2
  • Feb 2023 55.1
  • Jan 2023 55.2
  • Dec 2022 49.2
  • Nov 2022 56.5
  • Oct 2022 54.4
  • Sep 2022 56.7
  • Aug 2022 56.9
  • 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 – 53.5
High – 56.1
Low – 49.2

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.

Source: ISM World

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