Home ISM: Services PMI Indicates Ongoing Sector Growth
May 16, 2023

ISM: Services PMI Indicates Ongoing Sector Growth

Posted In: Retail Articles

Economic activity in the services sector expanded in April for the fourth consecutive month as the Institute for Supply Chain Management Services Purchasing Managers Index, based on a poll of purchasing and supply executives in the United States, grew to 51.9%.

Retail is among the services industries that grew in April.

The dividing line between growth and contraction is 50%. The services sector has gained in 34 of the last 35 months, with the lone contraction in December 2022. In contrast, the manufacturing sector has contracted over the past six months after growing for a 28-month period. However, it has been moving in a positive direction. The manufacturing sector PMI registered 47.1% in April, 0.8 percentage points higher than the 46.3% recorded in March.

In a report issued by the ISM Services Business Survey Committee, its chair, Anthony Nieves, stated: “In April, the Services PMI registered 51.9%, 0.7 percentage points higher than March’s reading of 51.2%. The composite index indicated growth in April for the fourth consecutive month after a reading of 49.2% in December, the first contraction since May 2020. The Business Activity Index registered 52%, a 3.4-percentage point decrease compared to the reading of 55.4% in March. The New Orders Index expanded in April for the fourth consecutive month after contracting in December for the first time since May 2020. The figure of 56.1% is 3.9 percentage points higher than the March reading of 52.2%. The Supplier Deliveries registered 48.6%, 2.8 percentage points higher than the 45.8% recorded in March. Looking back beyond the past few months, this month the index has reflected the fastest supplier delivery performance since December 2015, when it registered 48.5%. Supplier Deliveries is the only ISM Report On Business®index that is inversed: a reading of above 50% indicates slower deliveries, which is typical as the economy improves and customer demand increases.

Nieves also noted that the Prices Index gained “0.1 percentage point in April, to 59.6%. The Inventories Index contracted in April after two consecutive months of growth preceded by eight straight months of contraction. The reading of 47.2% is down 5.6 percentage points from March’s figure of 52.8%. The Inventory Sentiment Index, 48.9%, down 9 percentage points from March’s reading of 57.9%, contracted after four consecutive months of growth preceded by a four-month period of contraction. There has been a slight uptick in the rate of growth for the services sector, due mostly to the increase in new orders and ongoing improvements in both capacity and supply logistics. The majority of respondents are mostly positive about business conditions. However, some respondents are wary of potential headwinds associated with inflation and an economic slowdown.”

The 14 services industries reporting growth in April were Arts, Entertainment & Recreation; Other Services; Real Estate, Rental & Leasing; Accommodation & Food Services; Utilities; Public Administration; Transportation & Warehousing; Professional, Scientific & Technical Services; Educational Services; Health Care & Social Assistance; Retail Trade; Construction; Finance & Insurance, and Information. The three industries reporting an April decrease were Mining; Agriculture, Forestry, Fishing & Hunting, and Wholesale Trade.

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