Economic activity in the services sector continued to expand in February, according to the latest ISM Services PMI Report. The Services PMI registered 56.1%, its 20th month in a row in expansion territory.
The report was issued by Steve Miller, chair of the Institute for Supply Management (ISM) services business survey committee: “In February, the Services PMI registered a reading of 56.1%, an increase of 2.3 percentage points over January’s figure of 53.8% and the highest since July 2022 (56.5%). The Business Activity Index accelerated its expansion in February, registering 59.9%, 2.5 percentage points higher than its reading of 57.4% recorded in January. The New Orders Index also accelerated its expansion in February, with a reading of 58.6%, 5.5 percentage points above January’s figure of 53.1%. The Employment Index expanded for the third month in a row with a reading of 51.8%, a 1.5-percentage point increase from the 50.3% recorded in January.”
Miller said, “The Supplier Deliveries Index registered 53.9%, 0.3 percentage point lower than the 54.2% recorded in January. This is the 15th 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 inversed; a reading of above 50% indicates slower deliveries, which is typical as the economy improves and customer demand increases.) The Prices Index registered 63% in February, dropping to 3.4 percentage points below its 12-month average of 66.4%. The February figure was a 3.6-percentage point decrease from January’s reading of 66.6%. The index has exceeded 60% for 15 straight months, but February’s reading is its lowest since March 2025 (61.4%).”
Miller continued, “The Inventories Index registered 56.4% in February, an increase of 11.3 percentage points from January’s figure of 45.1%. The Inventory Sentiment Index expanded for the 34th consecutive month, registering 55.3%, up 1 percentage point from January’s figure of 54.3%. The Backlog of Orders Index was in expansion territory for the first time since February 2025, registering 55.9% in February, an 11.9-percentage point increase from the January figure of 44%. The New Export Orders and Imports indexes also returned to expansion territory. The New Export Orders Index increased to 57.2%, a 12.2-percentage point increase over its February reading of 45%, and the Imports Index returned to expansion territory at 51.8%, an increase of 3.6 percentage points over January’s reading of 48.2%.”
Miller added, “Fourteen industries reported growth in February, three more than in January, and the number reporting contraction shrank to three. The February Services PMI reading of 56.1% is 4.1 percentage points above the 12-month average of 52%. This average is an uptick of 0.2 percentage point over January’s 12-month average of 51.8%. February’s Services PMI features the third month in a row with all four subindexes being in expansion territory, similar to a period from December 2024 through February 2025. Also, all 10 reported indexes were in expansion territory for the first time since March 2021. Further, eight of these indexes are on positive trends, with increases of as much as 11 percentage points over the last six months. The two indexes with negative trends over this time period are Prices, which has declined 6 percentage points, and Inventory Sentiment, which is down 0.4 percentage point. Although the Prices Index is still in expansion territory and in its longest streak above 60% since March 2023, February’s reading is its lowest in 11 months.”
Miller concluded, “The services sector is heating up, with the Business Activity, New Orders, and New Export Orders indexes at their highest levels since 2024, and the Backlog of Orders Index with its best reading since July 2022 (58.3%). The Supplier Deliveries Index is higher (and indicates slower deliveries) than its 12-month average, but the index has eased slightly since the previous month. Gasoline was noted by some respondents as a commodity up in price for the first time since February 2025, and copper was up in price for the third month in a row. Commentary on trade uncertainty increased, with respondents commenting that tariffs impacts have stabilized and are now embedded in supply chain costs. Although there were several comments on tariff uncertainty regarding the U.S. Supreme Court decision, there was no alarm regarding supply chain performance, suggesting that services companies have developed capabilities to routinely address shifts in tariff policies.”
Industry Performance
The 14 services industries reporting growth in February — listed in order — are:
- Mining; Information
- Real Estate, Rental & Leasing
- Agriculture, Forestry, Fishing & Hunting
- Accommodation & Food Services
- Wholesale Trade
- Finance & Insurance
- Utilities
- Professional, Scientific & Technical Services
- Construction
- Management of Companies & Support Services
- Public Administration
- Health Care & Social Assistance
- Educational Services
The three industries reporting a contraction in the month of February are:
- Retail Trade
- Arts, Entertainment & Recreation
- Transportation & Warehousing
