Economic Activity in Services Sector Expands Again in September

Economic activity in the services sector expanded in September for the ninth consecutive month as the Services PMI registered 53.6%, according to the latest Services ISM Report on Business from the Institute for Supply Management. The sector has grown in 39 of the last 40 months, with the lone contraction in December 2022.

“In September, the Services PMI registered 53.6%, 0.9 percentage point lower than August’s reading of 54.5%. The composite index indicated growth in September for the ninth consecutive month after a reading of 49.2% in December 2022, which was the first contraction since June 2020 (45.4%),” Anthony Nieves, CPSM, CPM, APP, CFPM, chair of the Institute for Supply Management’s services business survey committee, said. “The Business Activity Index registered 58.8%, a 1.5-percentage point increase compared to the reading of 57.3% in August. The New Orders Index expanded in September for the ninth consecutive month after contracting in December for the first time since May 2020; the figure of 51.8% is 5.7 percentage points lower than the August reading of 57.5%.

“The Supplier Deliveries Index registered 50.4%, 1.9 percentage point higher than the 48.5% recorded in August. The index is in expansion (or ‘slowing’) territory for the first time since November 2022, when it registered 53.8%. Still, the average reading of 48.1% in the last seven months (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 58.9% in September, matching its August reading. The Inventories Index expanded in September for the fifth consecutive month after one month of contraction preceded by two months of growth and eight months of contraction from June 2022 to January 2023; the reading of 54.2% is down 3.5 percentage points from August’s figure of 57.7%. The Inventory Sentiment Index (54.8%, down 6.7 percentage points from August’s reading of 61.5%) expanded for the fifth consecutive month after one month of contraction preceded by four months of growth, with a four-month period of contraction from August to November 2022. The Backlog of Orders Index registered 48.6%, a 6.8-percentage point increase compared to the August figure of 41.8%.

“Thirteen industries reported growth in September. The Services PMI, by being above 50% for the ninth month after a single month of contraction and a prior 30-month period of expansion, continues to indicate sustained growth for the sector. The composite index has indicated expansion for all but three of the previous 163 months.

“There has been a slight pullback in the rate of growth for the services sector, which is attributed to slower rates of growth in the New Orders and Employment indexes. The majority of respondents remain positive about business conditions; moreover, some respondents indicated concern about potential headwinds.”

The 13 services industries that reported growth in September included mining, finance and insurance, and construction. The five industries that reported a decrease in September included agriculture, wholesale trade and entertainment and recreation.

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