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July 7, 2022

ISM: Service Industries Continue Growth Despite Low Inventories

Posted In: Retail Articles

The latest Institute for Supply Management Services Business Survey Committee report notes that economic activity in the services sector, including retail, grew in June for the 25th month in a row.

The ongoing survey of purchasing and supply executives registered a figure 5.3 points higher than the growth/decline divider at 50%.

Anthony Nieves, chair of the ISM Services Business Survey Committee, saidtthe June PMI reading of 55.3% was 0.6 percentage point less than May’s reading of 55.9%, the lowest reading since 45.2% in May 2020. The Business Activity Index registered 56.1%, he stated, an increase of 1.6 percentage points compared to the May reading of 54.5%. The New Orders Index figure of 55.6% came in two percentage points lower than the 57.6% May reading. At the same time, the Supplier Deliveries Index registered 61.9%, 0.6 percentage point higher than May’s 61.3% figure. Supplier Deliveries is the only ISM Report On Business index that is inversed, with a reading above 50% indicating 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 two percentage points to 80.1%,” Nieves maintained. “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% is down 3.5 percentage points from May’s figure of 51%. The Inventory Sentiment Index, 46.2%, up 1.7 percentage points from May’s reading of 44.5%, contracted in June for the fourth consecutive month, indicating that inventories are in ‘too low’ territory and insufficient for current business requirements.”

Nieves indicated all 18 industries in the Services PMI reported growth, adding, “The composite index indicated growth for the 25th consecutive month after a two-month contraction in April and May 2020. Growth continues, albeit slower, for the services sector, which has expanded for all but two of the last 149 months. The slight slowdown in services sector growth was due to a decline in new orders and employment. The Employment Index, 47.4%, contracted, and the Backlog of Orders Index grew 8.5 percentage points, to 60.5%. Logistical challenges, a restricted labor pool, material shortages, inflation, the coronavirus pandemic and the war in Ukraine continue to negatively impact the services sector.”

Listed in order of gain, the 18 services industries reporting growth in June were: Mining; Management of Companies & Support Services; Other Services; Construction; Arts, Entertainment & Recreation; Utilities; Public Administration; Wholesale Trade; Health Care & Social Assistance; Professional, Scientific & Technical Services; Transportation & Warehousing; Accommodation & Food Services; Retail Trade; Finance & Insurance; Agriculture, Forestry, Fishing & Hunting; Information; Real Estate, Rental & Leasing, and Educational Services.


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