Economic activity in the services sector expanded in October for the 10th consecutive month as the Services PMI registered 51.8%, according to the latest Services ISM Report on Business from the Institute for Supply Management. The sector has grown in 40 of the last 41 months, with the lone contraction in December 2022.
“In October, the Services PMI registered 51.8%, 1.8 percentage points lower than September reading of 53.6%. The composite index indicated growth in October for the 10th consecutive month after a reading of 49.2% in December 2022, which was the first contraction since May 2020 (45.4%),” Anthony Nieves, CPSM, C.P.M., A.P.P., CFPM, chair of the Institute for Supply Management’s services business survey committee, said. “The Business Activity Index registered 54.1%, a 4.7-percentage point decrease compared to the reading of 58.8% in September. The New Orders Index expanded in October for the 10th consecutive month after contracting in December for the first time since May 2020; the figure of 55.5% is 3.7 percentage points higher than the September reading of 51.8%.
“The Supplier Deliveries Index registered 47.5%, 2.9 percentage points lower than the 50.4% recorded in September. The index returned to contraction territory, indicating that supplier delivery performance was ‘faster’ in contrast to the ‘slowing’ status from the previous month. In the last eight months, the average reading of 48% (with a low of 45.8% in March) reflects the fastest supplier delivery performance since June 2009, when the index registered 46%. (Supplier Deliveries is the only ISM Report on Business index that is inversed; a reading of above 50% indicates slower deliveries, which is typical as the economy improves and customer demand increases.)
“The Prices Index registered 58.6% in October, a 0.3-percentage point decrease from the September reading of 58.9%. The Inventories Index returned to contraction in October, registering 49.5%, a decrease of 4.7 percentage points from September’s figure of 54.2%. The Inventory Sentiment Index (54.4%, down 0.4 percentage point from September’s reading of 54.8%) expanded for the sixth consecutive month. The Backlog of Orders Index registered 50.9%, a 2.3-percentage point increase compared to the September reading of 48.6%.
“Twelve industries reported growth in October. The Services PMI, by being above 50% for the 10th month after a single month of contraction and a prior 30-month period of expansion, continues to indicate sustained growth for the sector, though at a slower rate in October.
“The services sector continues to slow, with decreases in the Business Activity and Employment indexes. Sentiment among business survey committee respondents’ comments is mixed, with some optimistic about the current steady and stable business conditions and others concerned about such economic factors as inflation, interest rates and geopolitical events. Employment-related challenges are also prevalent, with comments about increasing labor costs, as well as shortages.”
