Economic activity in the services sector continued to grow in March, although retail declined, according to the Institute for Supply Management’s latest Purchasing Managers Index report.
The Manufacturing PMI registered 52.7% in March, a 0.3-percentage point increase from the February reading of 52.4 %.
The Services PMI registered 54% in the 21st consecutive month in expansion territory. The poll of purchasing and supply executives in the United States remained above 50%, the breakeven between increasing and decreasing activity. However, in introducing the report, Steve Miller, chair of the ISM Services Business Survey Committee pointed out the March PMI decreased 2.1 percentage points from February’s figure of 56.1%.
Miller said, there March Services PMI “is the lowest reading since September 2025, 50.2%. The New Orders Index registered 60.6%, two percentage points above February’s figure of 58.6% and its highest level since February 2023, 61%. The Employment Index contracted for the first time in four months with a reading of 45.2%, a 6.6-percentage point decrease from the 51.8% recorded in February. The Supplier Deliveries Index registered 56.2%, 2.3 percentage points higher than the 53.9% recorded in February. This is the 16th consecutive month that the index has been in expansion territory, indicating slower supplier delivery performance.”
Miller noted Supplier Deliveries is the only ISM PMI Reports index that is inversed, as a reading of above 50% indicates slower deliveries, which is typical as the economy improves and customer demand increases.
“The Prices Index registered 70.7% in March, a 7.7-percentage point increase over February’s figure of 63% and its highest reading since October 2022, 70.7%. The index has exceeded 60% for 16 straight months but is only 3.5 percentage points above its 12-month average of 67.2%,” Miller stated. “The Inventories Index registered 54.8% in March, a decrease of 1.6 percentage points from February’s figure of 56.4%. The Inventory Sentiment Index expanded for the 35th consecutive month, registering 54.3%, down one percentage point from February’s figure of 55.3% and matching its January reading. The Backlog of Orders Index remained in expansion territory for a second straight month for the first time since May 2024, registering 53.6% in March, a 2.3-percentage point decrease from the February figure of 55.9%. The New Export Orders and Imports indexes both remained in expansion territory for the second month in a row. The New Export Orders Index decreased to 50.7%, 6.5 percentage points below its February reading of 57.2%, and the Imports Index increased by 3.4 percentage points to 55.2% from its February reading of 51.8%.”
Miller added that the March Services PMI reading of 54% is 1.7 percentage points above the 12-month average of 52.3%, an uptick of 0.3 percentage point over February’s 12-month average of 52%.
“The Prices Index increased, as expected, amid higher oil and fuel costs, and the Supplier Deliveries Index indicated slower performance compared to February, also unsurprisingly with shipping issues and flight disruptions due to the Middle East conflict and winter weather,” Miller maintained. “Continuing strength in business activity, new orders and backlog of orders are positive economic signals, so the Employment Index dropping to its lowest level since December 2023, 43.5%, was a surprise. There are other signs of economic strength. Exports and imports activity have expanded for two months in a row for the first time since September and October 2024. The predominant commentary this month was about impacts and adjustments due to the conflict with Iran and the expected flow through of higher oil prices at some point. Companies across many industries reported seeing higher gas and diesel pricing, and inventories of multiple goods increased to withstand supply chain disruptions or short-term oil price impacts. Such construction products as lumber, copper and steel were noted as up in price. Although tariff impacts were still noted by panelists, Iran-related impacts dominated the comments in March.”
Service industries that reported growth in March were Wholesale Trade; Management of Companies & Support Services; Finance & Insurance; Accommodation & Food Services; Transportation & Warehousing; Educational Services; Mining; Construction; Utilities; Other Services; Real Estate, Rental & Leasing; Professional, Scientific & Technical Services, and Information. The industries reporting a contraction in the month of March were Retail Trade; Agriculture, Forestry, Fishing & Hunting, and Public Administration.
The Manufacturing PMI reading indicates that the overall U.S. economy continued in expansion for the 17th month in a row. A Manufacturing PMI 47.5%, over a period of time, signals an expansion of the overall economy.
The manufacturing industries reporting growth in March were Printing & Related Support Activities; Primary Metals; Transportation Equipment; Miscellaneous Manufacturing; Electrical Equipment, Appliances & Components; Textile Mills; Computer & Electronic Products; Fabricated Metal Products; Machinery; Paper Products; Nonmetallic Mineral Products; Wood Products; and Chemical Products. The industries reporting contraction in March were Plastics & Rubber Products; Furniture & Related Products, and Food, Beverage & Tobacco Products.
