- 17 services industries reported growth in August
- Hiring issues remain
- Supply chain challenges continue
- Construction sees economic growth
The business sector that includes construction, the services sector, saw a slight dip in its economic activity in August, but only because companies can’t find enough workers and materials are in short supply.
Anthony Nieves, chair of the Institute for Supply Management (ISM) Services Business Survey Committee, delivered the Services ISM Report on Business on Sept. 3, saying the services sector is experiencing growth at 61.7%, but is down slightly from its historic high at 64.1% in July.
“We’ve had some pull back, which was to be expected,” Nieves says. “We couldn’t maintain such a high rate ongoing, especially with the capacity constraints.”
The ISM Services PMI index is a set of economic indicators based off surveys of private-sector companies in the services sector, which includes construction.
“(Survey) respondents are saying it’s just tough filling jobs out there,” he says. “We know there’s been a challenge with the availability of containers, trucks and drivers. There’s been port congestion; throw weather into the mix, and the fact that the output upstream in the supply chain is not up to speed as far as demand, both with staffing and materials.”
According to one survey respondent in the construction industry, “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.”
August was the 15th straight month of growth for the sector.
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% age points from the July figure of 82.3%.
“According to the Services PMI, 17 services industries reported growth,” he says. “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.”
ISM PMI Services Report History.ISM
Industry Performance
The 17 services industries reporting growth in August, listed in order, are: accommodation and food services; retail trade; construction; educational services; information; mining; other services; utilities; public administration; transportation and warehousing; health care and social assistance; wholesale trade; management of companies and support services; agriculture, forestry, fishing and hunting; finance and insurance; real estate, rental and leasing; and professional, scientific and technical services. The only industry to report a decrease is arts, entertainment and recreation.
ISM PMI Services Report Prices.ISM
Prices
Prices paid by services organizations for materials and services increased in August, with the index registering 75.4%, 6.9% age points lower than July's reading of 82.3%.
All 18 services industries reported an increase in prices paid during the month of August, listed in order: retail trade; management of companies and support services; wholesale trade; utilities; construction; mining; public administration; information; educational services; agriculture, forestry, fishing and hunting; other services; accommodation and food services; professional, scientific and technical services; transportation and warehousing; health care and social assistance; arts, entertainment and recreation; real estate, rental and leasing; and finance and insurance. No industry reported a decrease in prices for the month of August.
Commodities
The following commodities have increased in price (the number of consecutive months the commodity is listed is indicated after each item): aluminum (two); computer hardware; construction contractors (two); construction materials; copper products (two); diesel (nine); electrical components (seven); fiber-optic cable (two); freight (four); freight - less-than-truckload; food and beverages; fuel (eight); gasoline (nine); labor (nine); labor - construction; labor - temporary (eight); labor benefits; machinery components; metal products (four); packaging materials (four); pallets; paper products; plastic products; plumbing products (two); polyvinyl chloride conduit; polyvinyl chloride pipe and fittings; resin-based products (two); steel (12); steel - hot rolled; steel - stainless; steel products (eight); transportation rates (two) and wire and cable.
Lumber is the only commodity down in price.
The following commodities are in short supply: chicken wings; computer equipment; construction subcontractors; electronic components (five); equipment parts; fiber-optic cable (two); foley catheter insertion trays; food and beverages; lab supplies; labor; labor - temporary (eight); laptops and desktop computers; metal products; microchips; needles and syringes; pipette (six); resin-based products; steel conduit; and stretch film.
ISM PMI Services Report Business Activity.ISM
Business Activity
ISM's Business Activity Index registered 60.1% in August, a decrease of 6.9 percentage points from the July reading of 67%. This represents growth for the 15th consecutive month.
Comments from respondents include: “Business is continuing at an aggressive pace; we are on track to hit our financial goals” and “Business activity remains high as a result of strong consumer and business demand.” Also, “High levels of pent-up demand and supply shortages.”
The 15 industries reporting an increase in business activity for the month of August, listed in order, are: public administration; accommodation and food services; educational services; other services; retail trade; health care and social assistance; utilities; construction; information; agriculture, forestry, fishing and hunting; finance and insurance; transportation and warehousing; mining; wholesale trade; and professional, scientific and technical services. The two industries reporting a decrease in August are arts, entertainment and recreation and real estate, rental and leasing.
ISM PMI Services Report New Orders.ISM
New Orders
ISM's New Orders Index registered 63.2%, a decrease of a 0.5 percentage point from the July reading of 63.7%. New orders grew for the 15th consecutive month after two months of contraction and a preceding period of 128 months of expansion. Comments from respondents include:
“Expansion into new markets has provided an uptick in business” and “Increased client demand for new and add-on projects.”
The 13 industries that reported growth of new orders in August, listed in order, are: information; accommodation and food services; retail trade; educational services; construction; other services; mining; health care and social assistance; finance and insurance; public administration; utilities; transportation and warehousing; and professional, scientific and technical services.
The three industries reporting a decrease in new orders for the month of August are arts, entertainment and recreation; real estate, rental and leasing and wholesale trade.
ISM PMI Services Report Employment.ISM
Employment
Employment activity in the services sector grew in August for the second consecutive month after contracting in June. ISM's Services Employment Index registered 53.7% in August, down 0.1 percentage point from the July reading of 53.8%.
Comments from respondents include: “We are hiring at record levels to staff our restaurants, but turnover is high, and many former employees are still on extended unemployment or not ready to return to work,” and “Increasingly difficult to find qualified candidates to fill open positions.”
The nine industries reporting an increase in employment in August, listed in order, are: arts, entertainment and recreation; educational services; real estate, rental and leasing; retail trade; transportation and warehousing; utilities; wholesale trade; construction; and professional, scientific and technical services. The four industries that reported a reduction in employment in August are: agriculture, forestry, fishing and hunting; finance and insurance; health care and social assistance; and information.
ISM PMI Services Report supplier deliveries.ISM
Supplier Deliveries
The Supplier Deliveries Index registered 69.6%, which is 2.4 percentage points lower than the 72% reported in July. A reading above 50% indicates slower deliveries, while a reading below 50% indicates faster deliveries.
Comments from respondents include: “Significant delays caused by late container deliveries,” and “Logistics constraints continue to slow the supply chain.”
The 17 industries reporting slower deliveries in August, listed in order, are: accommodation and food services; mining; real estate, rental and leasing; construction; management of companies and support services; agriculture, forestry, fishing and hunting; other services; information; public administration; utilities; wholesale trade; retail trade; transportation and warehousing; educational services; health care and social assistance; professional, scientific and technical services; and finance and insurance. No industries reported faster supplier deliveries in August.
ISM PMI Services Report Inventories.ISM
Inventories
The Inventories Index contracted in August for the third consecutive month. The reading of 46.9% was a 2.3 percentage point decrease from the 49.2% reported in July. Of the total respondents in August, 38% indicated they do not have inventories or do not measure them. Comments from respondents include: “Safety stock is depleted” and “Strong demand is keeping inventory levels low.”
The seven industries reporting an increase in inventories in August, listed in order, are: arts, entertainment and recreation; accommodation and food services; other services; health care and social assistance; construction; wholesale trade; and utilities.
The nine industries reporting a decrease in inventories in August, listed in order, are: retail trade; real estate, rental and leasing; management of companies and support services; agriculture, forestry, fishing and hunting; mining; information; transportation and warehousing; public administration; and professional, scientific and technical services.
ISM PMI Services Report Backlog of Orders.ISM
Backlog of Orders
The ISM Services Backlog of Orders Index grew in August for the 14th time in the last 15 months. The index registered 61.3%; 2.2 percentage points lower than the 63.5% reported in July. Of the total respondents in August, 39% indicated they do not measure backlog of orders.
The 12 industries reporting an increase in order backlogs in August, listed in order, are: other services; transportation and warehousing; retail trade; public administration; information; educational services; wholesale trade; accommodation and food services; health care and social assistance; utilities; construction; and professional, scientific and technical services. The three industries that reported a decrease in backlogs in August are arts, entertainment and recreation; management of companies and support services; and mining.
ISM PMI Services Report New Export Orders.ISM
New Export Orders
Orders and requests for services and other non-manufacturing activities to be provided outside of the U.S. by domestically based companies grew in August for the seventh consecutive month. The New Export Orders Index registered 60.6% in August, 5.2 percentage points lower than the 65.8% reported in July. Of the total respondents in August, 71% indicated they either do not perform, or do not separately measure, orders for work outside of the U.S.
The 10 industries reporting an increase in new export orders in August, listed in order, are: accommodation and food services; information; real estate, rental and leasing; utilities; construction; finance and insurance; retail trade; wholesale trade; professional, scientific and technical services; and transportation and warehousing. No industry reported a decrease in exports in August; eight industries reported no change.
ISM PMI Services Report Imports.ISM
Imports
The Imports Index contracted in August, as it registered 48.7%, 2.9 percentage points lower than July's figure of 51.6%. Sixty-six percent of respondents reported that they do not use, or do not track the use of, imported materials.
The four industries reporting an increase in imports for the month of August are: transportation and warehousing; real estate, rental and leasing; wholesale trade; and construction. The eight industries reporting a decrease in imports in August, listed in order, are: agriculture, forestry, fishing and hunting; accommodation and food services; management of companies and support services; finance and insurance; retail trade; health care and social assistance; information; and professional, scientific and technical services. Six industries reported no change in imports in August.
ISM PMI Services Report Inventory Sentiment.ISM
Inventory Sentiment
The ISM Services Inventory Sentiment Index contracted in August for the fifth consecutive month, registering 41.4%, 1.1% percentage points higher than July's figure of 40.3%. This indicates that respondents feel their inventories are too low when correlated to business activity levels.
The seven industries reporting sentiment that their inventories were too high in August, listed in order, are: arts, entertainment and recreation; finance and insurance; accommodation and food services; mining; utilities; information; and health care and social assistance. The nine industries reporting a feeling that their inventories were too low in August, listed in order, are: real estate, rental and leasing; agriculture, forestry, fishing and hunting; retail trade; professional, scientific and technical services; management of companies and support services; transportation and warehousing; educational services; wholesale trade; and public administration.
