According to the Institute for Supply Management Report on Business, the services Purchasing Managers Index fell to 51.2% from 55.1% in March, but the sector remained in growth territory.
Readings above 50% indicated sector growth. The services sector has grown in 33 of the last 34 months, with the only contraction in December 2022, ISM noted. Retail was one industry in the services sector, as defined by ISM, that experienced decline, however.
In detailing the PMI components, Anthony Nieves, chair of the ISM’s Services Business Survey Committee, stated:
The Business Activity Index registered 55.4%, a 0.9-percentage point decrease compared to the reading of 56.3% in February. The New Orders Index expanded in March for the third consecutive month after contracting in December for the first time since May 2020. The figure of 52.2% is 10.4 percentage points lower than the February reading of 62.6%. The Supplier Deliveries registered 45.8%, 1.8 percentage points lower than the 47.6% recorded in February. In the last two months, the index has reflected the fastest supplier delivery performance since April 2009, when it registered 45.5%.”
Nieves pointed out that the Supplier Deliveries is the only Report On Business index that is inversed so that a reading of above 50% indicates slower deliveries, which is typical as the U.S. economy improves and customer demand increases.
The Prices Index was down 6.1 percentage points in March, to 59.5%. The Inventories Index grew in March for the second consecutive month after contracting for eight months in a row. The reading of 52.8% is up 2.2 percentage points from February’s figure of 50.6%. The Inventory Sentiment Index–57.9%, up 2.6 percentage points from February’s reading of 55.3–expanded for the fourth consecutive month after a four-month period of contraction.
There has been a pullback in the rate of growth for the services sector, attributed mainly to a cooling off in the new orders growth rate, an employment environment that varies by industry and continued improvements in capacity and logistics, a positive impact on supplier performance. The majority of respondents report a positive outlook on business conditions.”
The 13 services industries reporting growth in March are Other Services; Arts, Entertainment & Recreation; Educational Services; Accommodation & Food Services; Public Administration; Mining; Management of Companies & Support Services; Agriculture, Forestry, Fishing & Hunting; Professional, Scientific & Technical Services; Utilities; Health Care & Social Assistance; Construction; and Information. The five industries reporting contraction in March are Finance & Insurance; Wholesale Trade; Real Estate, Rental & Leasing; Transportation & Warehousing; and Retail Trade.