ISM: Services Sector Economic Activity Continues to Grow in August



Economic activity in the services sector grew in August for the 15th month in a row, according to purchasing and supply executives in the latest Services ISM Report On Business.

“The Services PMI registered 61.7%, 2.4 percentage points lower than the all-time high reading of 64.1 in July. The August reading indicates the 15th straight month of growth for the services sector, which has expanded for all but two of the last 139 months,” Anthony Nieves, CPSM, C.P.M., A.P.P., CFPM, chair of the Institute for Supply Management (ISM) Services Business Survey Committee, said.

“The Supplier Deliveries Index registered 69.6%, down 2.4 percentage points from July’s reading of 72%. (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 75.4%, down 6.9 percentage points from the July figure of 82.3%.” Nieves said.

“According to the Services PMI, 17 services industries reported growth. The composite index indicated growth for the 15th consecutive month after a two-month contraction in April and May 2020. There was a pullback in the rate of expansion in the month of August; however, growth remains strong for the services sector. The tight labor market, materials shortages, inflation and logistics issues continue to cause capacity constraints,” Nieves said.

INDUSTRY PERFORMANCE

The 17 services industries reporting growth in August — listed in order — are: Accommodation & Food Services; Retail Trade; Construction; Educational Services; Information; Mining; Other Services; Utilities; Public Administration; Transportation & Warehousing; Health Care & Social Assistance; Wholesale Trade; Management of Companies & Support Services; Agriculture, Forestry, Fishing & Hunting; Finance & Insurance; Real Estate, Rental & Leasing; and Professional, Scientific & Technical Services. The only industry to report a decrease is Arts, Entertainment & Recreation.

WHAT RESPONDENTS ARE SAYING

  • “Supply chain disruptions — including manufacturing-labor shortages, logistics delays and lack of material to make products — are significantly disrupting our business.” [Accommodation & Food Services]
  • “There is a shortage of available workers which is challenging our business operations.” [Agriculture, Forestry, Fishing & Hunting]
  • “Material and labor shortages continue to hinder productivity. Price increases are ever-present and repetitive. Large, multinational manufacturers have had multiple price increases in the last three months.” [Construction]
  • “Budget constraints due to student enrollment (impacted by) COVID-19 restrictions. Outlook to remain flat or little increase. Supply chain constraints with regard to limited supply of computer hardware to fulfill orders.” [Educational Services]
  • “Inpatient- and outpatient-services and ancillary-services volumes continue to be very high. Driven by increased admissions and increased lengths of stay. Pharmaceutical volume is high as well, which relates to patient volume in our cancer center. Surgical-case volumes remain strong, as do associated physician services. Emergency room visits exceeded budgeted levels by 14.2 percent. This volume resulted in an increase in diagnostic services, specifically CT scans. In addition, we are seeing an increase in COVID-19 patients again.” [Health Care & Social Assistance]
  • “Supplies are tight in technology hardware.” [Information]
  • “Temporary labor continues to be in short supply. Transportation costs are inflating prices on all products.” [Management of Companies & Support Services]
  • “Activity level continues to increase.” [Mining]
  • “Continuing supply chain disruptions and supply cost increases.” [Professional, Scientific & Technical Services]
  • “Chemicals and transportation services are in short supply. Also, chip shortages are affecting several large-project time lines.” [Public Administration]
  • “Business in all segments continues to gain, both month over month and year-to-date versus 2020. Projections and forecasts remain quite robust.” [Real Estate, Rental & Leasing]
  • “A limited supply of critical items has caused us to expand our line of products and our supplier base. Services like ash cleaning, trash removal, internet installations and the like are experiencing staffing shortages, causing us to find alternative sources or adjust schedules. Travel has increased 60 percent since February for internal employees.” [Retail Trade]
  • “Steel shortages continue. Labor constraints at suppliers continue to push delivery dates out. Logistics issues (are also ongoing), as container space, truck drivers and the like remain difficult to obtain.” [Wholesale Trade]

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