Economic activity in the services sector continued to expand in March, according to purchasing and supply executives in the latest ISM Services PMI Report. The services PMI registered 54%, the 21st consecutive month in expansion territory.
The report was issued by Steve Miller, chair of the Institute for Supply Management (ISM) services business survey committee: “In March, the Services PMI registered 54 percent, a decrease of 2.1 percentage points compared to February’s figure of 56.1 percent and its second-highest reading since October 2024 (55.5 percent). The Business Activity Index remained in expansion territory in March but dropped from February’s reading of 59.9 percent to 53.9 percent, its lowest reading since September 2025 (50.2 percent). The New Orders Index registered 60.6 percent, 2 percentage points above February’s figure of 58.6 percent and its highest level since February 2023 (61 percent). The Employment Index contracted for the first time in four months with a reading of 45.2 percent, a 6.6-percentage point decrease from the 51.8 percent recorded in February.”
Miller said, “The Supplier Deliveries Index registered 56.2 percent, 2.3 percentage points higher than the 53.9 percent recorded in February. This is the 16th 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 percent indicates slower deliveries, which is typical as the economy improves and customer demand increases.) The Prices Index registered 70.7 percent in March, a 7.7-percentage point increase over February’s figure of 63 percent and its highest reading since October 2022 (70.7 percent). The index has exceeded 60 percent for 16 straight months but is only 3.5 percentage points above its 12-month average of 67.2 percent.”
Miller continued, “The Inventories Index registered 54.8 percent in March, a decrease of 1.6 percentage points from February’s figure of 56.4 percent. The Inventory Sentiment Index expanded for the 35th consecutive month, registering 54.3 percent, down 1 percentage point from February’s figure of 55.3 percent and matching its January reading. The Backlog of Orders Index remained in expansion territory for a second straight month for the first time since May 2024, registering 53.6 percent in March, a 2.3-percentage point decrease from the February figure of 55.9 percent. The New Export Orders and Imports indexes both remained in expansion territory for the second month in a row: The New Export Orders Index decreased to 50.7 percent, 6.5 percentage points below its February reading of 57.2 percent, and the Imports Index increased by 3.4 percentage points to 55.2 percent from its February reading of 51.8 percent.”
Miller added, “Thirteen industries reported growth in March, one fewer than in February, and the number reporting contraction remained at three. The March Services PMI reading of 54 percent is 1.7 percentage points above the 12-month average of 52.3 percent. This average is an uptick of 0.3 percentage point over February’s 12-month average of 52 percent. March’s Services PMI features the third month in a row with an increase in the 12-month PMI average, up 0.6 percentage point from 51.7 percent in December 2025 to 52.3 percent. However, six of the 10 subindexes decreased month-over-month. The Prices Index increased, as expected, amid higher oil and fuel costs, and the Supplier Deliveries Index indicated slower performance compared to February, also unsurprisingly with shipping issues and flight disruptions due to the Middle East conflict and winter weather. Continuing strength in business activity, new orders and backlog of orders are positive economic signals, so the Employment Index dropping to its lowest level since December 2023 (43.5 percent) was a surprise.”
Miller concluded, “There are other signs of economic strength. Exports and imports activity have expanded for two months in a row for the first time since September and October 2024. The predominant commentary this month was about impacts and adjustments due to the conflict with Iran and the expected flow through of higher oil prices at some point. Companies across many industries reported seeing higher gas and diesel pricing, and inventories of multiple goods increased to withstand supply chain disruptions or short-term oil price impacts. Such construction products as lumber, copper and steel were noted as up in price. Although tariff impacts were still noted by panelists, Iran-related impacts dominated the comments in March.”
The 13 services industries reporting growth in March — listed in order — are:
- Wholesale trade
- Management of companies and support services
- Finance and insurance
- Accommodation and food services
- Transportation and warehousing
- Educational services
- Mining
- Construction
- Utilities
- Other services
- Real estate, rental and leasing
- Professional, scientific and technical services
- Information
The three industries reporting a contraction in the month of March are:
- Retail trade
- Agriculture, forestry, fishing and hunting
- Public administration
