Services PMI® at 54.1%; December 2024 Services ISM® Report On Business®

Business Activity Index at 58.2%; New Orders Index at 54.2%; Employment Index at 51.4%; Supplier Deliveries Index at 52.5%

TEMPE, Ariz., Jan. 7, 2025 /PRNewswire/ -- Economic activity in the services sector expanded for the sixth consecutive month in December, say the nation's purchasing and supply executives in the latest Services ISM^® Report On Business^®. The Services PMI^® registered 54.1 percent, indicating expansion for the 52nd time in 55 months since recovery from the coronavirus pandemic-induced recession began in June 2020.

The report was issued today by Steve Miller, CPSM, CSCP, Chair of the Institute for Supply Management^® (ISM^®) Services Business Survey Committee: "In December, the Services PMI^® registered 54.1 percent, 2 percentage points higher than November's figure of 52.1 percent. The reading in December marked the 10th time the composite index has been in expansion territory this year. The Business Activity Index registered 58.2 percent in December, 4.5 percentage points higher than the 53.7 percent recorded in November, indicating a sixth consecutive month of expansion and finishing the year with its third-highest reading for 2024. The New Orders Index recorded a reading of 54.2 percent in December, 0.5 percentage point higher than November's figure of 53.7 percent. The Employment Index remained in expansion territory for the fifth time in six months; the reading of 51.4 percent is a 0.1-percentage point decrease compared to the 51.5 percent recorded in November.

"The Supplier Deliveries Index registered 52.5 percent, 3 percentage points higher than the 49.5 percent recorded in November. The index returned to expansion territory — indicating slower supplier delivery performance — to split the year, with six months each in expansion and contraction. (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 64.4 percent in December, a 6.2-percentage point increase from November's reading of 58.2 percent. This month's reading is the first time the index has registered over 60 percent since January. The Inventories Index stayed in contraction territory in December for the second month after three months in expansion, registering 49.4 percent, an increase of 3.5 percentage points from November's figure of 45.9 percent. The Inventory Sentiment Index expanded for the 20th consecutive month, registering 53.4 percent, down 1.2 percentage points from November's reading of 54.6 percent. The Backlog of Orders Index remained in contraction territory for a fifth consecutive month, registering 44.3 percent in December, a 2.8-percentage point decrease from the November reading of 47.1 percent.

"Nine industries reported growth in December, five fewer than the previous month's total. The Services PMI^® has expanded in 22 of the last 24 months dating back to January 2023, and the December reading is the third highest of 2024."

Miller continues, "The Services PMI^® in December was boosted primarily by strength in the Business Activity and Supplier Deliveries indexes. Many industries noted that end-of-year and seasonal factors were helping drive business activity or impact inventory management. Some of the increased business activity seems to have been driven by preparation for demand in the new year, or risk management for impacts from ports strikes and potential tariffs. There was general optimism expressed across many industries, but tariff concerns elicited the most panelist comments."

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

WHAT RESPONDENTS ARE SAYING

• "Preparations are underway to diversify supply in the anticipation for tariffs and the effect it will have on our business." [Accommodation & Food Services]
• "New residential construction remains hampered by interest rates and affordability issues. Tariff threats from incoming administration have been making suppliers reluctant to hold pricing for more than one year. As projects can take two-plus years, budgeting is getting difficult, similar to 2021 and 2022, when supply chain disruptions caused chaos in pricing." [Construction]
• "Moving work offshore to save cost." [Finance & Insurance]
• "Continued shortages of IV solutions have resulted in some cases being cancelled and/or delayed." [Health Care & Social Assistance]
• "Generally optimistic that the incoming administration will positively affect regulatory, tax and energy policies that will spur economic improvement. We are concerned about tariff activity and are hoping for the best." [Information]
• "Inflation levels seem to be increasing, thus dimming hopes of interest rate cuts." [Professional, Scientific & Technical Services]
• "Overall activity slightly higher than planned." [Retail Trade]
• "Seems to be a lot of uncertainty about tariffs and purchasing decisions. A lot of wait and see." [Transportation & Warehousing]
• "General business conditions are still going well. The end of (2024) is approaching, so end-of-year preparations are in full swing." [Utilities]
• "Customers are slowing down, and they are cutting back their inventories in preparation for the end of the year, so our sales are slowing down." [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
Beef, Computers; Diesel Fuel* Electrical Components (2); IV Solutions; Labor (49); Labor — Construction; Labor — Contingent; Lumber (4); and Oriented Strand Board (OSB).

Commodities Down in Price
Aluminum Based Products; Diesel Fuel* (3); Gasoline; and Poultry Products.

Commodities in Short Supply
Construction Contractors (3); Electrical Equipment (7); Electrical Components; IV Irrigation (2); IV Solutions (3); Labor — Construction; and Transformers (7).

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

*Indicates both up and down in price.

DECEMBER 2024 SERVICES INDEX SUMMARIES

Services PMI^®
In December, the Services PMI^® registered 54.1 percent, a 2-percentage point increase compared to the November reading of 52.1 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 percent, over time, generally indicates an expansion of the overall economy. Therefore, the December Services PMI^® indicates the overall economy is expanding for the sixth straight month. Miller says, "The past relationship between the Services PMI^® and the overall economy indicates that the Services PMI^® for December (54.1 percent) corresponds to a 1.7-percentage point increase in real gross domestic product (GDP) on an annualized basis."

SERVICES PMI^® HISTORY

Business Activity
ISM^®'s Business Activity Index registered 58.2 percent in December, 4.5 percentage points higher than the 53.7 percent recorded in November, a sixth month of expansion after contracting in June for the first time since May 2020. The Business Activity Index has been in expansion territory for 54 out of the 55 months since its coronavirus pandemic lows. Comments from respondents include: "Receiving orders for next cycle earlier than usual" and "More activity around possible higher tariffs impacting the supply chain."

The 10 industries reporting an increase in business activity for the month of December — listed in order — are: Finance & Insurance; Retail Trade; Arts, Entertainment & Recreation; Accommodation & Food Services; Utilities; Health Care & Social Assistance; Management of Companies & Support Services; Wholesale Trade; Information; and Public Administration. The two industries reporting a decrease in business activity for the month of December are: Real Estate, Rental & Leasing; and Educational Services. Six industries reported no change in business activity in December.

New Orders
ISM^®'s New Orders Index registered 54.2 percent in December, 0.5 percentage point higher than the reading of 53.7 percent registered in November. The index was in expansion for the sixth consecutive month after contracting in June for just the second time since May 2020. Comments from respondents include: "Fiscal year restarted" and "Mortgage rates have not fallen as anticipated; buyers are waiting on the sidelines."

The seven industries reporting an increase in new orders for the month of December — listed in order — are: Arts, Entertainment & Recreation; Finance & Insurance; Transportation & Warehousing; Retail Trade; Public Administration; Health Care & Social Assistance; and Utilities. The five industries reporting a decrease in new orders for the month of December are: Real Estate, Rental & Leasing; Educational Services; Construction; Information; and Professional, Scientific & Technical Services. Six industries reported no change in new orders in December.

Employment
Employment activity in the services sector expanded in December for the third consecutive month after a contraction in September. The Employment Index registered 51.4 percent, down 0.1 percentage point from the November figure of 51.5 percent. Comments from respondents include: "Staging for future growth" and "Hiring freeze."

The nine industries reporting an increase in employment in December — in the following order — are: Wholesale Trade; Finance & Insurance; Transportation & Warehousing; Accommodation & Food Services; Construction; Public Administration; Health Care & Social Assistance; Utilities; and Retail Trade. The four industries reporting a decrease in employment in December are: Real Estate, Rental & Leasing; Professional, Scientific & Technical Services; Information; and Educational Services.

Supplier Deliveries
In December, the Supplier Deliveries Index indicated slower supplier performance for the third time in four months. The index registered 52.5 percent, up 3 percentage points from the 49.5 percent recorded in November. A reading above 50 percent indicates slower deliveries, while a reading below 50 percent indicates faster deliveries. Comments from respondents include: "Continue to see suppliers struggle with delivery of products, which has been attributed largely to resource constraints and productivity in shops (high workload and quality issues)" and "Ocean freight is starting to have a backlog of container shipments."

The seven industries reporting slower deliveries in December — in the following order — are: Real Estate, Rental & Leasing; Public Administration; Health Care & Social Assistance; Finance & Insurance; Educational Services; Wholesale Trade; and Information. The four industries reporting faster supplier deliveries for the month of December are: Agriculture, Forestry, Fishing & Hunting; Management of Companies & Support Services; Construction; and Professional, Scientific & Technical Services. Seven industries reported no change in supplier deliveries.

Inventories
The Inventories Index landed in contraction territory for the second month in a row. The reading of 49.4 percent is a 3.5-percentage point increase compared to the 45.9 percent reported in November. Of the total respondents in December, 50 percent indicated they do not have inventories or do not measure them. Comments from respondents include: "Higher due to seasonality and capacity" and "Intentional draw down at year end."

The seven industries reporting an increase in inventories in December — in the following order — are: Accommodation & Food Services; Arts, Entertainment & Recreation; Retail Trade; Transportation & Warehousing; Information; Educational Services; and Health Care & Social Assistance. The six industries reporting a decrease in inventories in December — in the following order — are: Real Estate, Rental & Leasing; Public Administration; Management of Companies & Support Services; Wholesale Trade; Professional, Scientific & Technical Services; and Utilities.

Prices
Prices paid by services organizations for materials and services increased in December for the 91st consecutive month. The Prices Index registered 64.4 percent, 6.2 percentage points higher than the 58.2 percent recorded in November. The December reading is the 26th in a row below 70 percent, but the first above 60 percent since January 2024.

Fifteen of the 18 services industries reported an increase in prices paid during the month of December, in the following order: Other Services; Real Estate, Rental & Leasing; Finance & Insurance; Agriculture, Forestry, Fishing & Hunting; Transportation & Warehousing; Accommodation & Food Services; Public Administration; Construction; Health Care & Social Assistance; Professional, Scientific & Technical Services; Wholesale Trade; Retail Trade; Information; Educational Services; and Utilities. No industry reported a decrease in prices paid in December.

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 December for the fifth month in a row and the seventh time in 2024. The reading of 44.3 percent is 2.8 percentage points lower than the 47.1 percent reported in November. Of the total respondents in December, 43 percent indicated they do not measure backlog of orders. Respondent comments include: "We're simply catching up with new staff" and "Normalization of delivery schedules continues."

The four industries reporting an increase in order backlogs in December are: Arts, Entertainment & Recreation; Public Administration; Transportation & Warehousing; and Health Care & Social Assistance. The eight industries reporting a decrease in order backlogs in December — in the following order — are: Agriculture, Forestry, Fishing & Hunting; Real Estate, Rental & Leasing; Wholesale Trade; Management of Companies & Support Services; Construction; Educational Services; Utilities; and Professional, Scientific & Technical Services. Six industries reported no change in December.

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 increased in December to slightly over 50 percent. The New Export Orders Index registered 50.1 percent, a 0.5-percentage point increase from the 49.6 percent reported in November. This month's reading is the third lowest of 2024. Of the total respondents in December, 75 percent indicated they do not perform, or do not separately measure, orders for work outside of the U.S. Respondent comments include: "Revenue growth in Central America" and "Consumption of alcoholic beverages continues to decline."

The four industries reporting an increase in new export orders in December are: Arts, Entertainment & Recreation; Finance & Insurance; Transportation & Warehousing; and Wholesale Trade. The five industries reporting a decrease in new export orders in December are: Real Estate, Rental & Leasing; Agriculture, Forestry, Fishing & Hunting; Utilities; Professional, Scientific & Technical Services; and Information. Nine industries reported no change in new export orders in December.

Imports
The Imports Index expanded for the sixth consecutive month in December, registering 50.7 percent, 3.1 percentage points lower than the 53.8 percent reported in November. The index has indicated expansion in 23 of the last 28 months. Eighty-one percent of respondents reported that they do not use, or do not track the use of, imported materials. Respondent comments include: "Getting in front of tariffs" and "Buildup of inventory for first-quarter deployments."

The four industries reporting an increase in imports for the month of December are: Arts, Entertainment & Recreation; Retail Trade; Information; and Health Care & Social Assistance. The three industries reporting a decrease in imports in December are: Agriculture, Forestry, Fishing & Hunting; Management of Companies & Support Services; and Utilities. Eleven industries reported no change in imports in December.

Inventory Sentiment
The ISM^® Services Inventory Sentiment Index grew for the 20th consecutive month in December after one month of contraction in April 2023. The index registered 53.4 percent, a decrease of 1.2-percentage points from November's figure of 54.6 percent. This reading indicates that respondents feel their inventories are too high when correlated to industry levels.

The eight industries reporting sentiment that their inventories were too high in December — listed in order — are: Utilities; Wholesale Trade; Accommodation & Food Services; Other Services; Retail Trade; Construction; Health Care & Social Assistance; and Management of Companies & Support Services. The two industries reporting feeling that their inventories were too low in December are: Arts, Entertainment & Recreation; and Transportation & Warehousing. Eight industries reported no change in December.

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 December 2024.

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 Panel (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 Panel 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 BEA estimates (the average of the fourth quarter 2022 GDP estimate and the GDP estimates for first, second, and third quarter 2023, as released on December 21, 2023), the six largest services sectors are: Real Estate, Rental & Leasing; Public Administration; 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 percent, over time, indicates that the overall economy, or gross domestic product (GDP), is generally expanding; below 49 percent, it is generally declining. The distance from 50 percent or 49 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 Panel 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 manages 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 one exception is in January, the report is released on the fourth business day of the month.

The next Services ISM^® Report On Business^® featuring January 2025 data will be released at 10:00 a.m. ET on Wednesday, February 5, 2025.

*Unless the New York Stock Exchange is closed.

SOURCE Institute for Supply Management