The Institute for Supply Management (ISM) released its latest report today on the economic health of the services sector, which includes the construction industry. Overall, the economy continues to grow, albeit at a slower rate. And costs are hampering profits, one construction executive reported.
"Activity is steady. Costs continue to escalate, eliminating any profit we had hoped for in the first and second quarters," a construction executive told ISM.
Known as the Purchasing Managers’ Index (PMI), the report is created using a set of economic indicators based off surveys of private-sector companies. Service sector economic activity expanded in February, registering at 55.1 percent. The sector has grown in 32 of the past 33 months, the only contraction taking place in December. A Services PMI above 49.9 percent, over time, generally indicates an expansion of the overall economy.
“In February, the Services PMI registered 55.1 percent, 0.1 percentage point lower than January’s reading of 55.2 percent," said Anthony Nieves, chair of the ISM services business survey committee. "The composite index indicated growth in February for the second consecutive month after a reading of 49.2 percent in December, the first contraction since May 2020 (45.4 percent). The Business Activity Index registered 56.3 percent, a 4.1-percentage point decrease compared to the reading of 60.4 percent in January."
Thirteen industries within the services sector reported growth in February, he said. This indicates sustained growth for the sector, he added.
“Business Survey Committee respondents indicated that they are mostly positive about business conditions," Nieves said. "Suppliers continue to improve their capacity and logistics, as evidenced by faster deliveries. The employment picture has improved for some industries, despite the tight labor market. Several industries reported continued downsizing.”
ISM
The 13 services industries reporting growth in February, listed in order, are: agriculture, forestry, fishing and hunting; public administration; construction; professional, scientific and technical services; retail trade; utilities; other services; educational services; finance and insurance; arts, entertainment and recreation; real estate, rental and leasing; health care and social assistance and accommodation and food services. The four industries reporting a decrease in the month of February are: wholesale trade; transportation and warehousing; information; and management of companies and support services.
Commodities Pricing
The following commodities increased in price in February (the number of consecutive months the commodity is listed is indicated after each item): chemicals (3); copper wire; eggs (2); electrical components (25); electronic components (2); diesel fuel*; gasoline*; labor (27); labor - contract (2); labor - services; labor - skilled; soybean products; lumber; oriented strand board (OSB); pallets (2); services and steel products
The commodities that decreased in price include: diesel fuel* (2); gasoline* (7); PVC products; and steel products* (2).
Commodities in short supply are: appliances (3); blood collection tubes; circuit breakers (2); computer accessories; computer chips; containers; eggs; electronic components (2); labor (4); labor - construction; labor -technology and web-related; needles and syringes (2); semiconductors (2); tourniquets; transformers (6) and vehicles (8).
*Both up and down in price.
Business Activity
Construction was one of the industries to experience growth in February.
The 14 industries reporting an increase in business activity for the month of February, listed in order, are: agriculture, forestry, fishing and hunting; public administration; retail trade; construction; information; utilities; other services; professional, scientific and technical services; educational services; health care and social assistance; finance and insurance; management of companies and support services; transportation and warehousing; and accommodation and food services. The two industries reporting a decrease in business activity for the month are: real estate, rental and leasing; and wholesale trade.
According to ISM, the New Orders Index registered 62.6 percent, up 2.2 percentage points from the January reading of 60.4 percent. New orders expanded for the second consecutive month after contracting in December, ending a string of 30 consecutive months of growth. Comments from respondents included, “Increased requests for service and components” and “Customers starting to ramp up for the spring season.”
Construction also reported an increase in employment in February. According to the report, 10 industries had a bump in hiring. Listed in order they are: mining; arts, entertainment and recreation; construction; accommodation and food services; retail trade; public administration; professional, scientific and technical services; health care and social assistance; utilities; and finance and insurance. The four industries reporting a decrease in employment are: management of companies and support services; other services; transportation and warehousing; and educational services.
Prices index for February 2023.ISM
Pricing
Prices increased for the 69th consecutive month, the report said. The Prices Index registered at 65.6 percent, 2.2 percentage points lower than the 67.8 percent recorded in January. The index continues to indicate movement toward equilibrium, with an eighth consecutive reading near or below 70 percent, following nine straight months of readings above 80 percent.
Sixteen services industries reported an increase in prices paid during the month of February, in the following order: arts, entertainment and recreation; mining; public administration; health care and social assistance; construction; finance and insurance; utilities; agriculture, forestry, fishing and hunting; information; educational services; real estate, rental and leasing; management of companies and support services; professional, scientific and technical services; retail trade; wholesale trade; and transportation and warehousing. the only industry reporting a decrease in prices for February is accommodation and food services.
Read more of the report on ISM's website.
