ISM: Services Sector Growth Experiences ‘Slight Pull Back’ in October



Economic activity in the services sector grew in October for the fifth month in a row, according to the Services ISM Report On Business from the Institute for Supply Management.

“The Services PMI registered 56.6 percent, 1.2 percentage points lower than the September reading of 57.8 percent. This reading represents a fifth straight month of growth for the services sector, which has expanded for all but two of the last 129 months,” Anthony Nieves, CPSM, CPM, APP, CFPM, chair of the Institute for Supply Management services business survey committee, said. “The Supplier Deliveries Index registered 56.2 percent, up 1.3 percentage points from September’s reading of 54.9 percent. Supplier Deliveries is the only ISM Report On Business 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 figure of 63.9 percent is 4.9 percentage points higher than the September reading of 59 percent, indicating that prices increased in October at a faster rate. According to the Services PMI, 16 services industries reported growth. The composite index indicated growth for the fifth consecutive month after a two month contraction in April and May. There has been a slight pull back in the rate of growth in the services sector in the month of October. Respondents’ comments are cautiously optimistic about business conditions and the economy. There is a degree of uncertainty due to the pandemic, capacity constraints, logistics and the elections.”

There were 16 service industries that reported growth in October, including transportation and warehousing, construction, finance and insurance. The two industries reporting a decrease in October were arts, entertainment and recreation; and public administration.

What Respondents Are Saying

  • “Business has improved but greatly reliant on COVID-19-related restrictions. Supplier’s inventories and lead times are longer and spotty with outages due to keeping lead times lean as a cash flow measure but putting consistent supply at risk.” (Accommodation and Food Services)
  • “Interesting business cycle: Labor is still in short supply and work orders are picking up.” (Construction)
  • “Challenges to maintain safety and prevent the spread of COVID-19 has meant changes in the way activities are carried out. Purchases of personal protective equipment [PPE] and facilities equipment along with modifications to buildings and walkways has led to higher spending in some areas.” (Educational Services)
  • “Given COVID-19, the adjustments we have made across the company has allowed us to reach previous employment levels and those furloughed are back to work. Everyone is careful to wear the required PPE and keep distancing. We have added additional cleaning staff between shifts to upgrade sanitation.” (Finance and Insurance)
  • “The new normal COVID-19 environment is causing uncertainty, but we’ve seen an increase in business that is close to pre-COVID-19 volumes for procedures.” (Health Care and Social Assistance)
  • “While the economy is getting better, there is still very much uncertainty about the future. We are putting capital expenditures on hold until we gain additional confidence and certainty.” (Information)
  • “We are remaining cautiously positive and resuming normal business operations.” (Management of Companies and Support Services)
  • “Encouraging signs continue for an improved fourth quarter.” (Professional, Scientific and Technical Services)
  • “We continue to be cautiously optimistic that the rebound in business that began in July continues to sustain.” (Retail Trade)
  • “Business continues to gain as people are travelling and businesses are opening up to consumers.” (Wholesale Trade)

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