ISM: Services Sector Sustains ‘Strong Growth’ in September as Supply Chain Struggles

Economic activity in the services sector grew in September for the 16th month in a row, according to the latest Services ISM Report on Business from the Institute for Supply Management.

“The Services PMI registered 61.9%, 0.2 percentage point higher than the reading of 61.7% in August. The September reading indicates the 16th straight month of growth for the services sector, which has expanded for all but two of the last 140 months,” Anthony Nieves, CPSM, CPM, APP, CFPM, chair of the Institute for Supply Management’s services business survey committee, said. “The Supplier Deliveries Index registered 68.8%, down 0.8 percentage point from August’s reading of 69.6%. (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 77.5%, up 2.1 percentage points from the August figure of 75.4%.”

“According to the Services PMI, 17 services industries reported growth. The composite index indicated growth for the 16th consecutive month after a two-month contraction in April and May 2020. The slight uptick in the rate of expansion in the month of September continued the current period of strong growth for the services sector. However, ongoing challenges with labor resources, logistics and materials are affecting the continuity of supply.”

Transportation and warehousing, finance and insurance and construction were among the 17 industries that reported growth in September. Agriculture, forestry, fishing and hunting was the only industry to report a decrease.

What Respondents Are Saying

  • “Transportation bottlenecks are increasing, resulting in longer lead times and missed appointments.” (Accommodation and Food Services)
  • “Constraints on logistics from a cost and availability standpoint continue to be an issue.” (Construction)
  • “Lead times on electronics and computer chips have greatly increased. Outlook for higher education remains flat for most colleges, not including elite and Ivy League institutions.” (Educational Services)
  • “International and domestic demand remains very strong.” (Finance and Insurance)
  • “Retaining clinical and temporary staffing is critical at this time. With the delta variant’s spread, we continue to see increased (COVID-19) cases but not as bad as January 2021. Vaccinations are clearly working. Most inpatient hospitalizations are of unvaccinated patients. The supply chain is still being impacted significantly by increased lead times for equipment and supplies.” (Healthcare and Social Assistance)
  • “The semiconductor (shortage is) impacting server delivery. Alternate parts and engineering efforts are being used to create workaround solutions.” (Information)
  • “Both domestic and international logistics are increasing lead times about six weeks for ocean freight and two weeks for domestic freight.” (Management of Companies and Support Services)
  • “Inventories shrinking due to global shipping logistics being a seller’s/provider’s market, with primary focus on yield versus market expansion.” (Professional, Scientific and Technical Services)
  • “Lead times have improved slightly over the last period but still remain lengthy relative to pre-pandemic levels. We continue to see rising costs for both supply and service inputs. The effects of these price increases have the potential to significantly impact our operations through the end of the year, especially if seasonal trends prove exceptionally strong.” (Public Administration)
  • “Business volumes remain remarkably high, although material shortages persist.” (Real Estate, Rental and Leasing)
  • “Still experiencing very strong demand. Supply chain is still a challenge.” (Retail Trade)
  • “Demand far outweighs supply for goods and services.” (Transportation and Warehousing)
  • “We continue to deal with extended delivery lead times and high costs. Stress on the supply chain beginning to be reflected in the quality of products offered and delivered. Current buying strategy is to wait — except with equipment, as (price) increases are expected.” (Utilities)
  • “Continued constrained supply of many key product groups. Also, inflationary pressures in most areas of the business keep driving costs higher. Inconsistent COVID-19 restrictions throughout the country are creating unstable business conditions that are concerning. However, business continues to be strong overall.” (Wholesale Trade)

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