Economic activity in the services sector expanded in February for the 14th consecutive month as the Services PMI registered 52.6%, according to the latest Services ISM Report on Business from the Institute for Supply Management. The sector has grown in 44 of the last 45 months, with the lone contraction in December 2022.
“In February, the Services PMI registered 52.6%, 0.8 percentage point lower than January’s reading of 53.4%,” Anthony Nieves, CPSM, CPM, APP, CFPM, chair of the ISM’s Services business survey committee, said. “The composite index indicated growth in February for the 14th consecutive month after a reading of 49% in December 2022, which was the first contraction since May 2020 (45.4%). The Business Activity Index registered 57.2% in February, which is 1.4 percentage points higher than the 55.8% recorded in January. The New Orders Index expanded in February for the 14th consecutive month after contracting in December 2022 for the first time since May 2020; the figure of 56.1% is 1.1 percentage points higher than the January reading of 55%. The Employment Index contracted for the second time in three months with a reading of 48%, a 2.5-percentage point decrease compared to the 50.5% recorded in January.
“The Supplier Deliveries Index registered 48.9%, 3.5 percentage points lower than the 52.4% recorded in January. The index returned to contraction — indicating that supplier delivery performance was faster after one month in expansion (or ‘slower’) territory. In the last 12 months, the average reading of 48.7% (with a low of 45.8 in March) reflects the fastest supplier delivery performance since December 2022, when the index registered 48.5%. (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 February, a 5.4-percentage point decrease from January’s reading of 64%. The Inventories Index contracted in February for the third consecutive month, registering 47.1%, a decrease of two percentage points from January’s figure of 49.1%. The Inventory Sentiment Index (56.7%, down 2.6 percentage points from January’s reading of 59.3%) expanded for the 10th consecutive month. The Backlog of Orders Index expanded for the second consecutive month in February after two previous months in contraction, registering 50.3%, a 1.1-percentage point decrease compared to the January reading of 51.4%.
“Fourteen industries reported growth in February. The Services PMI, by being above 50% for the 14th consecutive month (after a single month of contraction in December 2022 and a prior 30-month period of expansion), continues to indicate sustained growth — but at a slightly slower rate in February — for the sector.
“The slight decrease in the rate of growth in February is a result of faster supplier deliveries and the contraction in the Employment Index. The majority of respondents are mostly positive about business conditions. Respondents remain concerned about inflation, employment and ongoing geopolitical conflicts.”
