ISM Report On Business: Services PMI at 51.4% in July 2024

AUG 6, 2024 - 6:13 am

Economic activity in the services sector expanded in July, a trend that has been interrupted only three times — though twice in the last four months — since early in the coronavirus pandemic, according to the Institute for Supply Management’s (ISM) Report On Business. The Services PMI registered 51.4%, indicating sector expansion for the 47th time in 50 months.

The report was issued by Steve Miller, chair of ISM’s services business survey committee.

“In July, the services PMI registered 51.4%, 2.6 percentage points higher than June’s figure of 48.8%. The reading in July marked the fifth time the composite index has been in expansion territory in 2024. Before April, the services sector grew for 15 straight months following a services PMI reading of 49% in December 2022; the last contraction before that was in May 2020 (45.4%),” Mille said. “The business activity index registered 54.5% in July, which is 4.9 percentage points higher than the 49.6% recorded in June and a return to expansion after one month of contraction. The new orders index expanded to 52.4% in July, 5.1 percentage points higher than June’s figure of 47.3%; however, the index’s current reading is its fourth-lowest since early in the pandemic. The employment index expanded for just the second time in 2024; the reading of 51.1% is a 5-percentage point increase compared to the 46.1% recorded in June.

“The supplier deliveries index registered 47.6%, 4.6 percentage points lower than the 52.2% recorded in June,” Miller said. “The index returned to contraction territory — indicating faster supplier delivery performance — in July after two months in ‘slower’ territory. (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 57% in July, a 0.7-percentage point increase from June’s reading of 56.3%. The inventories index contracted for the second consecutive month in July, registering 49.8%, an increase of 6.9 percentage points from June’s figure of 42.9%,” Miller said. “The inventory sentiment index (63.2%, down 0.9 percentage point from June’s reading of 64.1%) expanded for the 15th consecutive month. The backlog of orders index returned to expansion territory for the fifth time in 2024, registering 50.6% in July, a 6.6-percentage point increase compared to the June reading of 44%.”

“Ten industries reported growth in July. The services PMI has expanded in 17 of the last 19 months dating back to January 2023, and the July reading is only 0.9 percentage point lower than the average of 52.3% over that period of time,” Miller said. “Also, the PMI has not recorded back-to-back months in contraction since April and May 2020, another indication of sustained growth for the sector.”

“The increase in the composite index in July is a result of an average increase of five percentage points for the business activity, new orders and employment indexes, offset by the 4.6-point drop in the supplier deliveries index,” Miller said. “The last time supplier deliveries was in contraction (faster) territory while the other three indexes registered expansion was in November 2023. Survey respondents again reported that increased costs are impacting their businesses, with generally positive commentary on business activity being flat or expanding gradually. Comments continued to express a wait-and-see attitude regarding the upcoming presidential election, with one respondent expressing concern over potential increases in tariffs. Many panelists noted a return to more stable supply chain performance, albeit with higher costs.”

The 10 services industries reporting growth in July — listed in order — are: