Economic activity in the services sector grew in August for the third consecutive month, according to purchasing and supply executives across the United States surveyed for the latest Institute for Supply Management Services PMI Report, with retail among the industries gaining.
Manufacturing, however, continued contracting, according to ISM.
The services sector Purchasing Mangers Index indicated expansion with the 52% August reading, above the 50% breakeven point for the 13th time in the last 14 months.
Steve Miller, chair of the ISM Services Business Survey Committee, said the August Services PMI registered 1.9 percentage points higher than the July figure of 50.1% and in expansion territory for the third consecutive month.
“The Business Activity Index remained in expansion in August, registering 55%, 2.4 percentage points higher than the reading of 52.6% recorded in July,” Miller stated. “This index has not been in contraction territory since May 2020. The New Orders Index also remained in expansion in August, with a reading of 56%, up 5.7% from July’s figure of 50.3%. The Employment Index was in contraction territory for the third month in a row and the fifth time in the last six months. The reading of 46.5% is 0.1 percentage point higher than the 46.4% recorded in July. The Supplier Deliveries Index registered 50.3%, 0.7 percentage point lower than the 51% recorded in July and matching the June reading. This is the ninth consecutive month that the index has been in expansion territory, indicating slower supplier delivery performance.”
Supplier Deliveries is the only ISM PMI Reports index that is inverted with a reading of above 50% indicating slower deliveries, which is typical as the economy improves and customer demand increases, according to ISM.
“The Prices Index registered 69.2% in August, a 0.7-percentage point decrease from July’s reading of 69.9%,” Miller noted. “The index has exceeded 60% for nine straight months, its longest such streak since 30 consecutive readings above 60% from October 2020 to March 2023. The Inventories Index was in expansion territory in August for its third month in a row, registering 53.2%, an increase of 1.4 percentage points from July’s figure of 51.8%. The Inventory Sentiment Index expanded for the 28th consecutive month, registering 55.5%, up 2.3 percentage points from July’s figure of 53.2%. The Backlog of Orders Index was in contraction territory for the sixth month in a row, registering 40.4% in August, 3.9-percentage points below the July figure of 44.3% and the lowest reading since May 2009.”
The Services PMI expanded in 11 of the past 12 months, but the August reading of 52% is 0.4 percentage point below the 12-month average of 52.4%, Miller indicated.
“August’s Services PMI level showed greater strength, driven by faster expansion rates for the Business Activity and New Orders indexes,” Miller maintained. “Offsetting these positive indicators, however, are continued contraction in the Employment Index, a 16-year low for the Backlog of Orders Index and the Prices Index remaining near 70%.”
Miller added comments from executives polled in August included more citations of tariff impacts with some signals indicating attempts to get ahead of additional price increases while preparing for the holiday peak season drove business activity and imports.
Service industries reporting growth in August were: Wholesale Trade; Arts, Entertainment & Recreation; Mining; Transportation & Warehousing; Educational Services; Professional, Scientific & Technical Services; Retail Trade; Utilities; Health Care & Social Assistance; Public Administration, and Real Estate, Rental & Leasing. Industries reporting an August contraction were: Accommodation & Food Services; Management of Companies & Support Services; Other Services, and Construction.
The Manufacturing PMI registered 48.7% in August, a 0.7-percentage point increase versus the 48% recorded in July. The overall economy continued in expansion for the 64th month after one month of contraction in April 2020, as a Manufacturing PMI above 42.3%, over a period of time, generally indicates an expansion of the overall economy.
The manufacturing industries reporting growth in August were Textile Mills; Apparel, Leather & Allied Products; Nonmetallic Mineral Products; Food, Beverage & Tobacco Products; Petroleum & Coal Products; Miscellaneous Manufacturing, and Primary Metals. The 10 industries reporting contraction in August were Paper Products; Wood Products; Plastics & Rubber Products; Transportation Equipment; Furniture & Related Products; Machinery; Electrical Equipment, Appliances & Components; Computer & Electronic Products; Chemical Products, and Fabricated Metal Products.
