ISM: Services Sector Economic Activity Remains on Upswing in July

Economic activity in the services sector grew in July for the 14th month in a row, with the rate of expansion hitting an all-time high, according to the latest Services ISM Report on Business from the Institute for Supply Management.

“The Services PMI registered another all-time high of 64.1%, which is four percentage points higher than the June reading of 60.1 and eclipses the previous record of 64% in May 2021,” Anthony Nieves, CPSM, CPM, APP, CFPM, chair of the Institute for Supply Management’s services business survey committee, said. “The July reading indicates the 14th straight month of growth for the services sector, which has expanded for all but two of the last 138 months.

“The Supplier Deliveries Index registered 72%, up 3.5 percentage points from June’s reading of 68.5%. (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 82.3%, up 2.8 percentage points from the June figure of 79.5% and its second-highest reading ever behind September 2005 (83.5%).

“According to the Services PMI, 17 services industries reported growth. The composite index indicated growth for the 14th consecutive month after a two-month contraction in April and May 2020. The rate of expansion in the services sector recorded another all-time high. The Employment Index reflected growth, even though the constrained labor pool continues to be an issue. Materials shortages, inflation and logistics continue to negatively impact the continuity of supply.”

Finance and insurance, construction and wholesale trade were among the 17 services industries that reported growth in July. No services industries reported a decrease in July.

What Respondents Are Saying

  • “Peak demand while still facing challenges filling open positions.” (Accommodation and Food Services)
  • “The slow movement of container traffic has definitely impacted our business in the first half of the year. We expect the situation will take another year to correct itself.” (Agriculture, Forestry, Fishing and Hunting)
  • “Costs have risen dramatically in the last 45 days. Lodging, fuel, travel and supplies are all rising sharply. Costs for available labor are also rising as demand increases in a diminished labor pool.” (Construction)
  • “Surgical volumes continue to increase, reflecting pent-up demand for services. However, the COVID-19 delta variant is impeding our ability to manage increased surgical volumes due to increased COVID-19 case admissions. Consistency of supply in a couple of categories (coagulation tubes and nitrile gloves) remains challenging, though moderately manageable.” (Healthcare and Social Assistance)
  • “Fuel prices are coming back down a bit. Labor shortage continues for drivers and general labor work. We have increased pay for many positions, but the shortage continues.” (Management of Companies and Support Services)
  • “Supply chain disruptions continue to impact sales.” (Professional, Scientific and Technical Services)
  • “Appliances, laptops and certain chemicals are still in short supply.” (Public Administration)
  • “Business continues to gain speed as the economy recovers and assuming there won’t be additional government-mandated lockdowns.” (Real Estate, Rental and Leasing)
  • “Continued shortages in computer equipment (laptops and PCs) are challenging for fulfillment needs. Corporate travel has resumed, but we’re seeing many flight cancellations and car rental shortages. Heating, ventilation and air conditioning (HVAC) repairs also impacted by longer than normal lead times for replacement units.” (Retail Trade)
  • “Ocean freight costs have created a negative impact to our business. The congestions at (the ports of) Long Beach/Los Angeles and Seattle have increased lead time by 15 days. Additional delays are occurring at the Chicago rail yard, (causing) two to three weeks of additional lead time.” (Wholesale Trade)

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