Services PMI® at 53.6%; September 2023 Services ISM® Report On Business®

Business Activity Index at 58.8%; New Orders Index at 51.8%; Employment Index at 53.4%; Supplier Deliveries Index at 50.4%

TEMPE, Ariz., Oct. 4, 2023 /PRNewswire/ -- Economic activity in the services sector expanded in September for the ninth consecutive month as the Services PMI^® registered 53.6 percent, say the nation's purchasing and supply executives in the latest Services ISM^® Report On Business^®. The sector has grown in 39 of the last 40 months, with the lone contraction in December 2022.

The report was issued today by Anthony Nieves, CPSM, C.P.M., A.P.P., CFPM, Chair of the Institute for Supply Management^® (ISM^®) Services Business Survey Committee: "In September, the Services PMI^® registered 53.6 percent, 0.9 percentage point lower than August's reading of 54.5 percent. The composite index indicated growth in September for the ninth consecutive month after a reading of 49.2 percent in December 2022, which was the first contraction since June 2020 (45.4 percent). The Business Activity Index registered 58.8 percent, a 1.5-percentage point increase compared to the reading of 57.3 percent in August. The New Orders Index expanded in September for the ninth consecutive month after contracting in December for the first time since May 2020; the figure of 51.8 percent is 5.7 percentage points lower than the August reading of 57.5 percent.

"The Supplier Deliveries Index registered 50.4 percent, 1.9 percentage point higher than the 48.5 percent recorded in August. The index is in expansion (or "slowing") territory for the first time since November 2022, when it registered 53.8 percent. Still, the average reading of 48.1 percent in the last seven months (with a low of 45.8 percent in March) reflects the fastest supplier delivery performance since June 2009, when the index registered 46 percent. (Supplier Deliveries is the only ISM^® Report On Business^® index that is inversed; a reading of above 50 percent indicates slower deliveries, which is typical as the economy improves and customer demand increases.)

"The Prices Index registered 58.9 percent in September, matching its August reading. The Inventories Index expanded in September for the fifth consecutive month, after one month of contraction preceded by two months of growth and eight months of contraction from June 2022 to January 2023; the reading of 54.2 percent is down 3.5 percentage points from August's figure of 57.7 percent. The Inventory Sentiment Index (54.8 percent, down 6.7 percentage points from August's reading of 61.5 percent) expanded for the fifth consecutive month after one month of contraction preceded by four months of growth, with a four-month period of contraction from August to November 2022. The Backlog of Orders Index registered 48.6 percent, a 6.8-percentage point increase compared to the August figure of 41.8 percent.

"Thirteen industries reported growth in September. The Services PMI^®, by being above 50 percent for the ninth month after a single month of contraction and a prior 30-month period of expansion, continues to indicate sustained growth for the sector. The composite index has indicated expansion for all but three of the previous 163 months."

Nieves continues, "There has been a slight pullback in the rate of growth for the services sector, which is attributed to slower rates of growth in the New Orders and Employment indexes. The majority of respondents remain positive about business conditions; moreover, some respondents indicated concern about potential headwinds."

INDUSTRY PERFORMANCE
The 13 services industries reporting growth in September — listed in order — are: Real Estate, Rental & Leasing; Retail Trade; Mining; Other Services; Utilities; Health Care & Social Assistance; Finance & Insurance; Construction; Professional, Scientific & Technical Services; Public Administration; Information; Transportation & Warehousing; and Educational Services. The five industries reporting a decrease in the month of September are: Agriculture, Forestry, Fishing & Hunting; Arts, Entertainment & Recreation; Accommodation & Food Services; Management of Companies & Support Services; and Wholesale Trade. 

WHAT RESPONDENTS ARE SAYING

• "Prices are coming down across the board for most commodities. However, there are still a few areas where supply is not available on a consistent basis, or what is being delivered is not to specifications." [Accommodation & Food Services]
• "Conditions remain favorable for mechanical contractors. New construction projects continue to launch. We are still seeing opportunities for cost reductions across many commodities. Inventory levels on finished goods remain strong." [Construction]
• "The market is stable at this time." [Educational Services]
• "I think the outlook of our company and the industry is a slow but steady improvement — from a plethora of unknowns to a daily sense of being able to manage the rigors of the supply chain." [Health Care & Social Assistance]
• "The market for the industry keeps looking positive, although there is a higher concentration of new projects at emerging markets. Opportunities in traditional markets like the U.S. or Europe have decreased, and my organization has managed to maintain or renew contracts that started two or three years ago." [Information]
• "Bank and leasing company volume seems to be falling as credit tightens, thus causing a slowdown in related services industries. Bankruptcy work is picking up." [Management of Companies & Support Services]
• "The fourth quarter is looking better than forecast, which is good because the third quarter of 2023 was below plan. Our customers are cautiously optimistic for a solid domestic performance, despite troubles in select foreign markets." [Professional, Scientific & Technical Services]
• "Business is ramping up in preparation for the holiday season. Our supply chain is strong." [Retail Trade]
• "Higher level of orders in past month. Business activity is stabilizing to last year's numbers." [Transportation & Warehousing]
• "Other than increases in fuel costs and some materials, activity and sales have been relatively stable month over month. However, a seasonal decrease in water sales is anticipated as cooler temperatures set in. Regional housing development projects continue to come online, in spite of higher interest rates." [Utilities]
• "Suppliers' lead times are approaching 'normal.' Electronic equipment containing chips continues to be on allocation." [Wholesale Trade]

Services ISM^® Report On Business^® data is seasonally adjusted for the Business Activity, New Orders, Employment and Prices indexes. Manufacturing ISM^® Report On Business^® data is seasonally adjusted for New Orders, Production, Employment and Inventories indexes.
*Number of months moving in current direction.

COMMODITIES REPORTED UP/DOWN IN PRICE, AND IN SHORT SUPPLY

Commodities Up in Price
Diesel Fuel (3); Electrical Equipment; Electrical Components (32); Fuel (2); Gasoline (8); Labor (34); Labor — Contract; Labor — Services; Lumber (4); Oil and Related Products; and Polyvinyl Chloride (PVC) Products.

Commodities Down in Price
Steel Products (2).

Commodities in Short Supply
Construction Materials; Electrical Components (6); Heating, Ventilation and Air Conditioning (HVAC) Equipment (2); Labor (11); Labor — Construction; Transformers (13); and Vehicles.

Note: The number of consecutive months the commodity is listed is indicated after each item.

SEPTEMBER 2023 SERVICES INDEX SUMMARIES

Services PMI^®
In September, the Services PMI^® registered 53.6 percent, a 0.9-percentage point decrease compared to the August reading of 54.5 percent. A reading above 50 percent indicates the services sector economy is generally expanding; below 50 percent indicates it is generally contracting.

A Services PMI^® above 49.9 percent, over time, generally indicates an expansion of the overall economy. Therefore, the September Services PMI^® indicates the overall economy is growing for the ninth consecutive month after one month of contraction in December 2022. Nieves says, "The past relationship between the Services PMI^® and the overall economy indicates that the Services PMI^® for September (53.6 percent) corresponds to a 1.3-percent increase in real gross domestic product (GDP) on an annualized basis."

SERVICES PMI^® HISTORY

Business Activity
ISM^®'s Business Activity Index registered 58.8 percent in September, an increase of 1.5 percentage points from the reading of 57.3 percent in August, indicating growth for the 40th consecutive month. Comments from respondents include: "Slight decline in restaurant traffic" and "Business activity is increasing after summer holidays."

The 14 industries reporting an increase in business activity for the month of September — listed in order — are: Real Estate, Rental & Leasing; Retail Trade; Utilities; Health Care & Social Assistance; Mining; Other Services; Transportation & Warehousing; Information; Finance & Insurance; Public Administration; Professional, Scientific & Technical Services; Educational Services; Wholesale Trade; and Management of Companies & Support Services. The three industries reporting a decrease in business activity for the month of September are: Agriculture, Forestry, Fishing & Hunting; Accommodation & Food Services; and Construction.

New Orders
ISM^®'s New Orders Index registered 51.8 percent, down 5.7 percentage points from the August reading of 57.5 percent. The index indicated expansion for the ninth consecutive month after contracting in December 2022, ending a string of 30 consecutive months of growth. Comments from respondents include: "Slightly lower number of new projects" and "Decreased guest traffic."

The 12 industries reporting an increase in new orders for the month of September — listed in order — are: Retail Trade; Transportation & Warehousing; Information; Mining; Other Services; Health Care & Social Assistance; Public Administration; Educational Services; Finance & Insurance; Utilities; Wholesale Trade; and Construction. The four industries reporting a decrease in new orders for the month of September are: Agriculture, Forestry, Fishing & Hunting; Arts, Entertainment & Recreation; Accommodation & Food Services; and Management of Companies & Support Services.

Employment
Employment activity in the services sector grew in September for the fourth consecutive month after contracting in May, with three consecutive months of growth before that. The Employment Index registered 53.4 percent, down 1.3 percentage points from the August figure of 54.7 percent. Comments from respondents include: "Lower due to filling vacated job positions" and "The labor market remains very competitive; we have lost employees due to normal attrition and are having issues backfilling these positions."

The nine industries reporting an increase in employment in September — listed in order — are: Retail Trade; Real Estate, Rental & Leasing; Mining; Other Services; Construction; Utilities; Finance & Insurance; Professional, Scientific & Technical Services; and Health Care & Social Assistance. The six industries reporting a decrease in employment in September — listed in order — are: Agriculture, Forestry, Fishing & Hunting; Arts, Entertainment & Recreation; Wholesale Trade; Management of Companies & Support Services; Transportation & Warehousing; and Public Administration.

Supplier Deliveries
The Supplier Deliveries Index indicated slower performance for the first time since November 2022. The index registered 50.4 percent, up 1.9 percentage points from the 48.5 percent recorded in August. A reading above 50 percent indicates slower deliveries, while a reading below 50 percent indicates faster deliveries. Comments from respondents include: "Suppliers are still struggling with delivery of products, which has been due largely to resource constraints and productivity issues, particularly with workload and quality" and "Fill rate is better due to a reduced order volume."

The six industries reporting slower deliveries in September — listed in order — are: Mining; Real Estate, Rental & Leasing; Construction; Professional, Scientific & Technical Services; Utilities; and Public Administration. The eight industries reporting faster supplier deliveries for the month of September — listed in order — are: Wholesale Trade; Agriculture, Forestry, Fishing & Hunting; Management of Companies & Support Services; Educational Services; Information; Finance & Insurance; Retail Trade; and Transportation & Warehousing. 

Inventories
The Inventories Index grew in September for the fifth consecutive month after contracting in April. The index indicated four months of growth from February to May 2022 and eight months of contraction from June 2022 to January 2023. The reading of 54.2 percent was a 3.5-percentage point decrease compared to the 57.7 percent reported in August. Of the total respondents in September, 44 percent indicated they do not have inventories or do not measure them. Comments from respondents include: "Reduced business has necessitated a lower inventory level" and "We are more comfortable with the current supply chain situation and have begun lowering inventory levels."

The nine industries reporting an increase in inventories in September — listed in order — are: Other Services; Real Estate, Rental & Leasing; Retail Trade; Finance & Insurance; Transportation & Warehousing; Utilities; Educational Services; Professional, Scientific & Technical Services; and Wholesale Trade. The five industries reporting a decrease in inventories in September are: Arts, Entertainment & Recreation; Agriculture, Forestry, Fishing & Hunting; Health Care & Social Assistance; Public Administration; and Information.

Prices
Prices paid by services organizations for materials and services increased in September for the 76th consecutive month. The Prices Index registered 58.9 percent, equaling the August figure, which indicates the same rate of increases and movement from equilibrium. The September reading is the 15th in a row near or below 70 percent (with seven straight months below 60 percent), following 10 straight months of readings near or above 80 percent.

Twelve services industries reported an increase in prices paid during the month of September, in the following order: Public Administration; Other Services; Utilities; Information; Arts, Entertainment & Recreation; Real Estate, Rental & Leasing; Professional, Scientific & Technical Services; Educational Services; Health Care & Social Assistance; Retail Trade; Wholesale Trade; and Construction. The four industries reporting a decrease in prices for September are: Transportation & Warehousing; Mining; Agriculture, Forestry, Fishing & Hunting; and Finance & Insurance.

NOTE: Commodities reported as up in price and down in price are listed in the commodities section of this report.

Backlog of Orders
The ISM^® Services Backlog of Orders Index contracted in September for the second consecutive month after expanding in July, preceded by four months of contraction from March to June and 26 straight months of growth before that. The index reading of 48.6 percent is 6.8 percentage points higher than the 41.8 percent reported in August. Of the total respondents in September, 52 percent indicated they do not measure backlog of orders. Respondent comments include: "Lead times have improved" and "Fewer new orders have allowed us to reduce backlog."

The six industries reporting an increase in order backlogs in September — listed in order — are: Mining; Finance & Insurance; Information; Professional, Scientific & Technical Services; Utilities; and Health Care & Social Assistance. The six industries reporting a decrease in order backlogs in September — listed in order — are: Agriculture, Forestry, Fishing & Hunting; Retail Trade; Management of Companies & Support Services; Wholesale Trade; Construction; and Transportation & Warehousing. Six industries reporting no change in backlogs.

New Export Orders
Orders and requests for services and other non-manufacturing activities to be provided outside of the U.S. by domestically based companies grew for the sixth consecutive month in September. The New Export Orders Index registered 63.7 percent, a 1.6-percentage point increase from the 62.1 percent reported in August. New export orders contracted in March 2023 after two months of expansion. The index indicated contraction from October to December 2022, with eight months (February-September 2022) of growth before that. Of the total respondents in September, 73 percent indicated they do not perform, or do not separately measure, orders for work outside of the U.S.

The nine industries reporting an increase in new export orders in September — listed in order — are: Real Estate, Rental & Leasing; Construction; Information; Mining; Retail Trade; Finance & Insurance; Utilities; Transportation & Warehousing; and Wholesale Trade. The two industries reporting a decrease in new export orders in September are: Agriculture, Forestry, Fishing & Hunting; and Professional, Scientific & Technical Services. Seven industries reported no change in new export orders in September.

Imports
The Imports Index registered 50.6 percent in September; 1.7 percentage points lower than August's reading of 52.3 percent. The index has indicated expansion in 11 of the last 13 months, with the only contraction in March and an "unchanged" status (a reading of 50 percent) in May. Sixty-nine percent of respondents reported that they do not use, or do not track the use of, imported materials.

The three industries reporting an increase in imports for the month of September are: Management of Companies & Support Services; Retail Trade; and Wholesale Trade. The three industries that reported a decrease in imports in September are: Agriculture, Forestry, Fishing & Hunting; Professional, Scientific & Technical Services; and Health Care & Social Assistance. Twelve industries reported no change in imports in September.

Inventory Sentiment
The ISM^® Services Inventory Sentiment Index grew for the fifth consecutive month in September after a contraction in April, preceded by four consecutive months of growth and four months of contraction (August-November 2022) prior to that. The index registered 54.8 percent, a 6.7-percentage point decrease from August's figure of 61.5 percent. This reading indicates that respondents feel their inventories are too high when correlated to business activity levels.

The nine industries reporting sentiment that their inventories were too high in September — listed in order — are: Arts, Entertainment & Recreation; Mining; Other Services; Utilities; Wholesale Trade; Construction; Retail Trade; Agriculture, Forestry, Fishing & Hunting; and Health Care & Social Assistance. The only industry reporting a feeling that their inventories were too low in September is Accommodation & Food Services. Eight industries reported no change in inventory sentiment in September.

About This Report
DO NOT CONFUSE THIS NATIONAL REPORT with the various regional purchasing reports released across the country. The national report's information reflects the entire U.S., while the regional reports contain primarily regional data from their local vicinities. Also, the information in the regional reports is not used in calculating the results of the national report. The information compiled in this report is for the month of September 2023.

The data presented herein is obtained from a survey of supply executives in the services sector based on information they have collected within their respective organizations. ISM^® makes no representation, other than that stated within this release, regarding the individual company data collection procedures. The data should be compared to all other economic data sources when used in decision-making.

Data and Method of Presentation
The Services ISM^® Report On Business^® (formerly the Non-Manufacturing ISM^® Report On Business^®) is based on data compiled from purchasing and supply executives nationwide. Membership of the Services Business Survey Committee (formerly Non-Manufacturing Business Survey Committee) is diversified by NAICS, based on each industry's contribution to gross domestic product (GDP). The Services Business Survey Committee responses are divided into the following NAICS code categories: Agriculture, Forestry, Fishing & Hunting; Mining; Utilities; Construction; Wholesale Trade; Retail Trade; Transportation & Warehousing; Information; Finance & Insurance; Real Estate, Rental & Leasing; Professional, Scientific & Technical Services; Management of Companies & Support Services; Educational Services; Health Care & Social Assistance; Arts, Entertainment & Recreation; Accommodation & Food Services; Public Administration; and Other Services (services such as Equipment & Machinery Repairing; Promoting or Administering Religious Activities; Grantmaking; Advocacy; and Providing Dry-Cleaning & Laundry Services, Personal Care Services, Death Care Services, Pet Care Services, Photofinishing Services, Temporary Parking Services, and Dating Services). The data are weighted based on each industry's contribution to GDP. According to the BEA estimates for 2021 GDP (released December 22, 2022), the six largest services sectors are: Real Estate, Rental & Leasing; Government; Professional, Scientific, & Technical Services; Health Care & Social Assistance; Information; and Finance & Insurance.

Survey responses reflect the change, if any, in the current month compared to the previous month. For each of the indicators measured (Business Activity, New Orders, Backlog of Orders, New Export Orders, Inventory Change, Inventory Sentiment, Imports, Prices, Employment and Supplier Deliveries), this report shows the percentage reporting each response and the diffusion index. Responses represent raw data and are never changed. Data is seasonally adjusted for Business Activity, New Orders, Prices and Employment. All seasonal adjustment factors are subject annually to relatively minor changes when conditions warrant them. The remaining indexes have not indicated significant seasonality.

The Services PMI^® is a composite index based on the diffusion indexes for four of the indicators with equal weights: Business Activity (seasonally adjusted), New Orders (seasonally adjusted), Employment (seasonally adjusted) and Supplier Deliveries. Diffusion indexes have the properties of leading indicators and are convenient summary measures showing the prevailing direction of change and the scope of change. An index reading above 50 percent indicates that the services economy is generally expanding; below 50 percent indicates that it is generally declining. Supplier Deliveries is an exception. A Supplier Deliveries Index above 50 percent indicates slower deliveries and below 50 percent indicates faster deliveries.

A Services PMI^® above 49.9 percent, over time, indicates that the overall economy, or gross domestic product (GDP), is generally expanding; below 49.9 percent, it is generally declining. The distance from 50 percent or 49.9 percent is indicative of the strength of the expansion or decline.

The Services ISM^® Report On Business^® survey is sent out to Services Business Survey Committee respondents the first part of each month. Respondents are asked to ONLY report on U.S. operations for the current month. ISM^® receives survey responses throughout most of any given month, with the majority of respondents generally waiting until late in the month to submit responses to give the most accurate picture of current business activity. ISM^® then compiles the report for release on the third business day of the following month.

The industries reporting growth, as indicated in the Services ISM^® Report On Business^® monthly report, are listed in the order of most growth to least growth. For the industries reporting contraction or decreases, those are listed in the order of the highest level of contraction/decrease to the least level of contraction/decrease.

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About Institute for Supply Management^®
Institute for Supply Management^® (ISM^®) is the first and leading not-for-profit professional supply management organization worldwide. Its community of more than 50,000 in more than 100 countries manage about US$1 trillion in corporate and government supply chain procurement annually. Founded in 1915 by practitioners, ISM is committed to advancing the practice of supply management to drive value and competitive advantage for its members, contributing to a prosperous and sustainable world. ISM empowers and leads the profession through the ISM® Report On Business^®, its highly-regarded certification and training programs, corporate services, events, and assessments. The ISM® Report On Business^®, Manufacturing, Services, and Hospital, are three of the most reliable economic indicators available, providing guidance to supply management professionals, economists, analysts, and government and business leaders. For more information, please visit: www.ismworld.org.

The full text version of the Services ISM^® Report On Business^® is posted on ISM^®'s website at www.ismrob.org on the third business day* of every month after 10:00 a.m. ET.

The next Services ISM^® Report On Business^® featuring October 2023 data will be released at 10:00 a.m. ET on Friday, November 3, 2023.

*Unless the New York Stock Exchange is closed.

SOURCE Institute for Supply Management