US Services Business Activity Accelerated in November, ISM Non-Manufacturing Shows

The ISM Non-Manufacturing Index for November increased to 56.5%, well ahead of a consensus 53.5% and up from 54.4% in October. The report follows the strong November jobs report released Friday indicating the economy is still hotter than the Federal Reserve would like at this time. Business activity for the non-manufacturing sector, which comprises the largest percentage of U.S. economic activity, strengthened in November, aiding the view that the Fed will keep rates higher for longer. The November reading marks the 30th straight month of growth for the services sector.

via Cheatsheet

The dividing line between expansion and contraction is 50.0%.

“Supplier deliveries continued to slow, albeit at a slower rate in November. Based on comments from Business Survey Committee respondents, increased capacity and shorter lead times have resulted in a continued improvement in supply chain and logistics performance. A new fiscal period and the holiday season have contributed to stronger business activity and increased employment.”

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

Highlights

  • The New Orders Index slipped to 56.0% from 56.5%.
  • The Business Activity/Production Index accelerated to 64.7% from 55.7%.
  • The Prices Index dipped to 70.0% from 70.7%.
  • The Employment Index rose to 51.5% from 49.1%.
  • The Supplier Deliveries Index fell to 53.8% from 56.2%.
  • The Backlog of Orders Index decreased to 51.8% from 52.2%.

The 12-month average is 60.80 percent, which reflects consistently strong growth in the services sector.

United States ISM Non Manufacturing PMI

WHAT RESPONDENTS ARE SAYING

  • “Business is doing well, almost back to pre-coronavirus pandemic volumes.” [Agriculture, Forestry, Fishing & Hunting]
  • “Generally unchanged month over month. New business requests are solid, with costs rising steadily for materials, meals and lodging.” [Construction]
  • “Still long lead times for service-related needs. A slight downturn in fuel costs in this region, but we are still experiencing supply chain shortages and delays.” [Educational Services]
  • “The labor forecast has improved, which has led to our ability to increase caseload, translating to higher surgical volumes. Some medical/surgical goods categories remain constrained — Vacutainer (blood collection tubes), wound care kits, syringes, hypodermic needles — but seeing modest improvement in other categories. Despite the uptick in RSV (respiratory syncytial virus) and flu, we anticipate that business activity will remain strong through the end of 2022.” [Health Care & Social Assistance]
  • “The demand for energy services remains very strong for the foreseeable future.” [Mining]
  • “No change from previous months — strong RFQ activity from our customers, but we’re struggling to get electronic materials. Suppliers are still holding to lead times between eight and 12 months for simple components. We don’t see this improving in 2023.” [Other Services]
  • “Job openings are seemingly continuing to decrease, but with demand for top talent still high and availability still rather scarce, the opportunity for growth is still there.” [Professional, Scientific & Technical Services]
  • “Overall business is stable. Employment is low and inflation is lower than last month. Supply chain issues are stabilizing.” [Retail Trade]
  • “Still struggling with recruitment, though we are starting to see more (higher quality) applicants, and (we are) hopeful the situation will quantitatively change in the first quarter of 2023. There are still struggles with longer-than-usual lead times affecting monthly delivery schedules.” [Transportation & Warehousing]
  • “Local, regional and national supply constraints continue to create supply chain complexities and challenges.” [Utilities]
  • “Business volume appears to be leveling out based on a month-over-month comparison, although we are up significantly when compared to the same month last year.” [Wholesale Trade]

COMMODITIES REPORTED UP/DOWN IN PRICE AND IN SHORT SUPPLY

Commodities Up in Price

Batteries; Construction Services; Diesel Fuel (2); Electrical Components (22); Fuel* (2); Gasoline* (2); Janitorial Maintenance Supplies; Labor (24); Labor — Full-Time; Labor — Technology and Web Related; Needles and Syringes; Pallets; and Services.

Commodities Down in Price

Fuel* (4); Gasoline* (4); and Steel Products.

Commodities in Short Supply

Chemicals; Concrete (2); Electronic Components; Janitorial Supplies; Labor; Plastic Products; Semiconductors (2); Transformers (3); and Vehicles (5).

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®

  • 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 – 57.2
High – 62.3
Low – 54.4


Business Activity

ISM®’s Business Activity Index registered 64.7 percent in November, a notable increase of 9 percentage points from the reading of 55.7 percent in October, indicating growth for the 30th consecutive month. Comments from respondents include: “Gaining more business” and “Demand for our services is increasing.”

The 13 industries reporting an increase in business activity for the month of November — listed in order — are: Real Estate, Rental & Leasing; Accommodation & Food Services; Mining; Other Services; Public Administration; Construction; Agriculture, Forestry, Fishing & Hunting; Health Care & Social Assistance; Information; Professional, Scientific & Technical Services; Retail Trade; Transportation & Warehousing; and Wholesale Trade. The one industry reporting a decrease in business activity for the month of November is Finance & Insurance.

New Orders

ISM®’s New Orders Index registered 56 percent, down 0.5 percentage point from the October reading of 56.5 percent. New orders grew for the 30th consecutive month after two months of contraction and a preceding period of 128 months of expansion. Comments from respondents include: “New customers added as our business continues to grow” and “Starting new fiscal year; ramping up projects.”

Twelve industries reported growth of new orders in November, in the following order: Real Estate, Rental & Leasing; Other Services; Retail Trade; Accommodation & Food Services; Agriculture, Forestry, Fishing & Hunting; Mining; Public Administration; Transportation & Warehousing; Health Care & Social Assistance; Construction; Professional, Scientific & Technical Services; and Utilities. The four industries reporting a decrease in new orders in November are: Management of Companies & Support Services; Wholesale Trade; Information; and Educational Services.

Employment

Employment activity in the services sector grew in November after contracting in October. ISM®’s Employment Index registered 51.5 percent, up 2.4 percentage points from the October reading of 49.1 percent. Comments from respondents include: “Slow improvement in staffing levels” and “Recruitment fairs have helped enable open positions to be filled.”

The nine industries reporting an increase in employment in November — listed in order — are: Mining; Retail Trade; Agriculture, Forestry, Fishing & Hunting; Arts, Entertainment & Recreation; Construction; Public Administration; Health Care & Social Assistance; Professional, Scientific & Technical Services; and Utilities. The six industries reporting a decrease in employment in November — listed in order — are: Management of Companies & Support Services; Transportation & Warehousing; Accommodation & Food Services; Information; Educational Services; and Finance & Insurance.

Supplier Deliveries

The Supplier Deliveries Index registered 53.8 percent, down 2.4 percentage points from the 56.2 percent recorded in October. A reading above 50 percent indicates slower deliveries, while a reading below 50 percent indicates faster deliveries. Comments from respondents include: “Supply chain issues easing” and “Reduced production times and transit times.”

The nine industries reporting slower deliveries in November — listed in order — are: Real Estate, Rental & Leasing; Mining; Health Care & Social Assistance; Construction; Finance & Insurance; Educational Services; Other Services; Transportation & Warehousing; and Utilities. The six industries reporting faster supplier deliveries for the month of November — listed in order — are: Wholesale Trade; Retail Trade; Arts, Entertainment & Recreation; Accommodation & Food Services; Information; and Professional, Scientific & Technical Services.

Inventories

The Inventories Index contracted in November for the sixth consecutive month after four straight months of growth preceded by an eight-month period of contraction. The reading of 47.9 percent was a 0.7-percentage point increase from the 47.2 percent reported in October. Of the total respondents in November, 34 percent indicated they do not have inventories or do not measure them. Comments from respondents include: “Trying to unload back stock purchased during supplier shortage period” and “Supply chain is improving; production and services are up.” Also: “No need to stock up more than needed, as inventory is being used faster than expected.”

The nine industries reporting an increase in inventories in November — listed in order — are: Arts, Entertainment & Recreation; Public Administration; Agriculture, Forestry, Fishing & Hunting; Utilities; Information; Wholesale Trade; Educational Services; Health Care & Social Assistance; and Professional, Scientific & Technical Services. The six industries reporting a decrease in inventories in November — listed in order — are: Accommodation & Food Services; Real Estate, Rental & Leasing; Management of Companies & Support Services; Mining; Retail Trade; and Construction.

Prices

Prices paid by services organizations for materials and services increased in November for the 66th consecutive month, with the index registering 70 percent, 0.7 percentage point lower than the 70.7 percent recorded in October. The Prices Index continues to indicate movement toward equilibrium, with a fifth consecutive reading near or below 70 percent, following nine straight months of readings above 80 percent.

Sixteen services industries reported an increase in prices paid during the month of November, in the following order: Accommodation & Food Services; Real Estate, Rental & Leasing; Health Care & Social Assistance; Management of Companies & Support Services; Public Administration; Educational Services; Utilities; Information; Agriculture, Forestry, Fishing & Hunting; Other Services; Professional, Scientific & Technical Services; Arts, Entertainment & Recreation; Mining; Retail Trade; Transportation & Warehousing; and Finance & Insurance. The two industries reporting prices unchanged in the month of November are: Wholesale Trade; and Construction. No industry reported a decrease in prices for November.

Backlog of Orders

The ISM® Services Backlog of Orders Index grew in November for the 23rd consecutive month. The index registered 51.8 percent, 0.4 percentage point lower than the October reading of 52.2 percent. Of the total respondents in November, 32 percent indicated they do not measure backlog of orders. Respondent comments include: “Supply chain transportation improvements” and “Slightly more capacity in the supply chain.”

The eight industries reporting an increase in order backlogs in November — listed in order — are: Accommodation & Food Services; Real Estate, Rental & Leasing; Information; Other Services; Educational Services; Health Care & Social Assistance; Construction; and Professional, Scientific & Technical Services. The five industries reporting a decrease in order backlogs in November are: Management of Companies & Support Services; Finance & Insurance; Public Administration; Wholesale Trade; and Utilities.

New Export Orders

Orders and requests for services and other non-manufacturing activities to be provided outside of the U.S. by domestically based companies contracted in November for the second consecutive month after an eight-month period of growth. The New Export Orders Index registered 38.4 percent, its lowest reading since April 2020 (36.3 percent) and a 9.3-percentage point decrease from the 47.7 percent reported in October. Of the total respondents in November, 78 percent indicated they do not perform, or do not separately measure, orders for work outside of the U.S.

The three industries reporting an increase in new export orders in November are: Mining; Utilities; and Wholesale Trade. The eight industries reporting a decrease in new export orders in November — listed in order — are: Real Estate, Rental & Leasing; Management of Companies & Support Services; Construction; Agriculture, Forestry, Fishing & Hunting; Other Services; Accommodation & Food Services; Educational Services; and Transportation & Warehousing. Seven industries indicated no change in new export orders in November.

Imports

The Imports Index grew for the third consecutive month in November after three previous months of contraction, registering 59.5 percent, up 9.1 percentage points from October’s reading of 50.4 percent. Seventy-five percent of respondents reported that they do not use, or do not track the use of, imported materials.

The six industries reporting an increase in imports for the month of November — listed in order — are: Real Estate, Rental & Leasing; Information; Retail Trade; Construction; Wholesale Trade; and Utilities. The five industries that reported a decrease in imports in November are: Arts, Entertainment & Recreation; Agriculture, Forestry, Fishing & Hunting; Accommodation & Food Services; Educational Services; and Health Care & Social Assistance. Seven industries reported no change in imports in November.

Inventory Sentiment

The ISM® Services Inventory Sentiment Index contracted in November for the fourth straight month and the 18th time in the last 20 months. The index registered 44.2 percent, a 2.2-percentage point decrease from October’s figure of 46.4 percent. This reading indicates that respondents feel their inventories are too low when correlated to business activity levels.

The eight industries reporting sentiment that their inventories were too high in November — listed in order — are: Accommodation & Food Services; Arts, Entertainment & Recreation; Wholesale Trade; Retail Trade; Agriculture, Forestry, Fishing & Hunting; Construction; Health Care & Social Assistance; and Utilities. The five industries reporting a feeling that their inventories were too low in November are: Real Estate, Rental & Leasing; Other Services; Management of Companies & Support Services; Professional, Scientific & Technical Services; and Educational Services.

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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