Services PMI® at 51.4%; March 2024 Services ISM® Report On Business®

Business Activity Index at 57.4%; New Orders Index at 54.4%; Employment Index at 48.5%; Supplier Deliveries Index at 45.4%

TEMPE, Ariz., April 3, 2024 /PRNewswire/ -- Economic activity in the services sector expanded in March for the 15th consecutive month as the Services PMI^® registered 51.4 percent, say the nation's purchasing and supply executives in the latest Services ISM^® Report On Business^®. The sector has grown in 45 of the last 46 months, with the lone contraction in December 2022.

The report was issued today by Anthony Nieves, CPSM, C.P.M., A.P.P., CFPM, Chair of the Institute for Supply Management^® (ISM^®) Services Business Survey Committee: "In March, the Services PMI^® registered 51.4 percent, 1.2 percentage points lower than February's reading of 52.6 percent. The composite index indicated growth in March for the 15th consecutive month after a reading of 49 percent in December 2022, which was the first contraction since May 2020 (45.4 percent). The Business Activity Index registered 57.4 percent in March, which is 0.2 percentage point higher than the 57.2 percent recorded in February. The New Orders Index expanded in March for the 15th consecutive month after contracting in December 2022 for the first time since May 2020; the figure of 54.4 percent is 1.7 percentage points lower than the February reading of 56.1 percent. The Employment Index contracted for the third time in four months with a reading of 48.5 percent, a 0.5-percentage point increase compared to the 48 percent recorded in February.

"The Supplier Deliveries Index registered 45.4 percent, 3.5 percentage points lower than the 48.9 percent recorded in February. The index continued in contraction for the second straight month — indicating that supplier delivery performance was faster — after one month in expansion (or 'slower') territory in January. In the last 12 months, the average reading of 48.7 percent (with a low of 45.4 percent this month) reflects the fastest supplier delivery performance since December 2022, when the index registered 48.5 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 registered 53.4 percent in March, a 5.2-percentage point decrease from February's reading of 58.6 percent. The Inventories Index contracted in March for the fourth consecutive month, registering 45.6 percent, a decrease of 1.5 percentage points from February's figure of 47.1 percent. The Inventory Sentiment Index (55.7 percent, down 1 percentage point from February's reading of 56.7 percent) expanded for the 11th consecutive month. The Backlog of Orders Index dropped into contraction in March after two consecutive months of expansion, registering 44.8 percent, a 5.5-percentage point decrease compared to the February reading of 50.3 percent.

"Twelve industries reported growth in March. The Services PMI^®, by being above 50 percent for the 15th consecutive month (after a single month of contraction in December 2022 and a prior 30-month period of expansion), continues to indicate sustained growth — but at a slower rate in March — for the sector."

Nieves continues, "The decrease in the rate of growth in March and the decline in the composite index is a result of slower new orders growth, faster supplier deliveries and a contraction in employment. The report continued to reflect growth month over month. Respondents indicated continuing improvement in logistics and the supply chain. Employment challenges remain a combination of difficulties in backfilling positions and/or controlling labor expenses. The Prices Index reflected its lowest reading since March 2020, when the index registered 50.4 percent; however, respondents indicated that even with some prices stabilizing, inflation is still a concern."

INDUSTRY PERFORMANCE
The 12 services industries reporting growth in March — listed in order — are: Accommodation & Food Services; Professional, Scientific & Technical Services; Agriculture, Forestry, Fishing & Hunting; Educational Services; Construction; Management of Companies & Support Services; Utilities; Retail Trade; Wholesale Trade; Other Services; Finance & Insurance; and Health Care & Social Assistance. The four industries reporting a decrease in the month of March are: Mining; Transportation & Warehousing; Real Estate, Rental & Leasing; and Information.

WHAT RESPONDENTS ARE SAYING

• "The Red Sea turmoil is still not a notable challenge on supply for our sector, but we're watching carefully for disruption risk. Also, the unrest in Haiti carries potential risk for the garment industry." [Accommodation & Food Services]
• "Our market is shaping up to be the first normal year since the start of COVID-19. Volumes were down in 2022 and 2023. A price correction was made last year, setting up sales to move back to historical volumes." [Agriculture, Forestry, Fishing & Hunting]
• "National business conditions remain strong in the industrial construction market. Labor is still tight across the country for skilled trades positions." [Construction]
• "We are experiencing a budget shortfall, like many of our peers in higher education, so our spending will be down at the end of this fiscal year (June 30). Hiring is at a much slower pace as well, and we are still experiencing high employee turnover. Public opinion on the value of higher education compared to the cost is having an impact on our enrollment." [Educational Services]
• "With the housing market continuing to stabilize, more mortgage inquiries are being made since my company opened up its mortgage loan program to loans other than Veterans Affairs loans." [Finance & Insurance]
• "Continued inflationary pressure across multiple clinical device categories as contracts expire or are renewed." [Health Care & Social Assistance]
• "Activity level holding steady for oil and gas." [Mining]
• "Our company and industry continue to pull back to prepare for economic volatility in the second half of the year. Cost reduction initiatives remain a top-five company objective, even in a high-growth environment." [Professional, Scientific & Technical Services]
• "Product supply chain is calm, and pricing steady. We are in slack time between seasons and use this time to prepare for spring/summer business. Challenges with employee retention in a few areas; however, turnover is only a few percent beyond target levels." [Retail Trade]
• "Lead times and supply are improving, but several strategic items remain difficult to procure." [Utilities]

Services ISM^® Report On Business^® data is seasonally adjusted for the Business Activity, New Orders, Employment and Prices indexes. Manufacturing ISM^® Report On Business^® data is seasonally adjusted for New Orders, Production, Employment and Inventories indexes.
*Number of months moving in current direction.

COMMODITIES REPORTED UP/DOWN IN PRICE, AND IN SHORT SUPPLY

Commodities Up in Price
Construction Contractors (3); Copper Wire; Diesel Fuel; Electrical Components; Electrical Equipment; Food (2); Fuel (2); Gasoline (2); Heating, Ventilation and Air Conditioning (HVAC) Equipment (2); Labor (40); Labor — Construction; Labor — Contract (7); Labor — Skilled (3); Lumber; Oriented Strand Board (OSB) Panels; Pharmaceuticals (2); Unleaded Fuel; and Wages and Benefits.

Commodities Down in Price
Natural Gas; Steel; and Steel Products.

Commodities in Short Supply
Cables; Construction Contractors (3); Electrical Components (3); Electrical Components — High Voltage; Electrical Equipment; Labor (2); Labor — Skilled; Switchgear; and Vehicles (7).

Note: The number of consecutive months the commodity is listed is indicated after each item.

MARCH 2024 SERVICES INDEX SUMMARIES

Services PMI^®
In March, the Services PMI^® registered 51.4 percent, a 1.2-percentage point decrease compared to the February reading of 52.6 percent. A reading above 50 percent indicates the services sector economy is generally expanding; below 50 percent indicates it is generally contracting.

A Services PMI^® above 49 percent, over time, generally indicates an expansion of the overall economy. Therefore, the March Services PMI^® indicates the overall economy is growing for the 15th consecutive month after one month of contraction in December 2022. Nieves says, "The past relationship between the Services PMI^® and the overall economy indicates that the Services PMI^® for March (51.4 percent) corresponds to a 0.8-percent increase in real gross domestic product (GDP) on an annualized basis."

SERVICES PMI^® HISTORY

Business Activity
ISM^®'s Business Activity Index registered 57.4 percent in March, 0.2 percentage point higher than the 57.2 percent recorded in February, indicating growth for the 46th consecutive month. The Business Activity Index has been in expansion territory since recovering from its coronavirus pandemic lows. Comments from respondents include: "Stronger sales and improving guest traffic resulting in increased employee hours" and "General business activity is good — inflation trend is downward, employment is strong and investors have positive feelings."

The 12 industries reporting an increase in business activity for the month of March — listed in order — are: Accommodation & Food Services; Agriculture, Forestry, Fishing & Hunting; Finance & Insurance; Educational Services; Retail Trade; Management of Companies & Support Services; Utilities; Professional, Scientific & Technical Services; Wholesale Trade; Public Administration; Construction; and Health Care & Social Assistance. The two industries reporting a decrease in business activity for the month of March are: Mining; and Transportation & Warehousing.

New Orders
ISM^®'s New Orders Index registered 54.4 percent in March, 1.7 percentage points lower than the reading of 56.1 percent registered in February. The index indicated expansion for the 15th consecutive month after contracting in December 2022, ending a string of 30 consecutive months of growth. Comments from respondents include: "Engagements that had previously been delayed have now been scheduled" and "Pipeline for spring/summer ramp-up."

The 11 industries reporting an increase in new orders for the month of March — listed in order — are: Professional, Scientific & Technical Services; Wholesale Trade; Retail Trade; Accommodation & Food Services; Agriculture, Forestry, Fishing & Hunting; Other Services; Educational Services; Utilities; Finance & Insurance; Construction; and Health Care & Social Assistance. The two industries reporting a decrease in new orders for the month of March are: Mining; and Public Administration.

Employment
Employment activity in the services sector contracted in March for the third time in four months, preceded by six consecutive months of growth from June to November. The Employment Index registered 48.5 percent, up 0.5 percentage point from the February figure of 48 percent. Comments from respondents include: "Attrition and slow backfill approval processes" and "Still working through year-end retirements and positions still not filled."

The six industries reporting an increase in employment in March — listed in order — are: Accommodation & Food Services; Construction; Public Administration; Utilities; Health Care & Social Assistance; and Educational Services. The five industries reporting a decrease in employment in March are: Mining; Finance & Insurance; Retail Trade; Transportation & Warehousing; and Information. Seven industries indicated no change in employment in March.

Supplier Deliveries
In March, the Supplier Deliveries Index indicated faster performance for the second consecutive month after a single month of slower performance preceded by three consecutive months of faster performance. The index registered 45.4 percent, down 3.5 percentage points from the 48.9 percent recorded in February. The index has been in "faster" territory in 12 of the last 14 months. A reading above 50 percent indicates slower deliveries, while a reading below 50 percent indicates faster deliveries. Comments from respondents include: "Slight uptick in normalizing delivery times" and "Fulfillment percentage is hovering around 93 or 94 percent; not sure if we will ever get back to pre-pandemic numbers of 98 or 99 percent since suppliers are just not carrying as much stock."

The four industries reporting slower deliveries in March are: Management of Companies & Support Services; Construction; Professional, Scientific & Technical Services; and Health Care & Social Assistance. The 12 industries reporting faster supplier deliveries for the month of March — listed in order — are: Real Estate, Rental & Leasing; Mining; Agriculture, Forestry, Fishing & Hunting; Accommodation & Food Services; Transportation & Warehousing; Wholesale Trade; Retail Trade; Public Administration; Information; Finance & Insurance; Educational Services; and Utilities.

Inventories
The Inventories Index contracted for the fourth consecutive month, and at a faster rate in March. The reading of 45.6 percent was a 1.5-percentage point decrease compared to the 47.1 percent reported in February. Of the total respondents in March, 44 percent indicated they do not have inventories or do not measure them. Comments from respondents include: "Inventory reduction initiative through optimization" and "We were able to build and rush orders to our customers for end-of-year revenue."

The three industries reporting an increase in inventories in March are: Public Administration; Transportation & Warehousing; and Utilities. The seven industries reporting a decrease in inventories in March, in order, are: Real Estate, Rental & Leasing; Mining; Agriculture, Forestry, Fishing & Hunting; Information; Construction; Management of Companies & Support Services; and Wholesale Trade. Eight industries reported no change in inventories in March.

Prices
Prices paid by services organizations for materials and services increased in March for the 82nd consecutive month. The Prices Index registered 53.4 percent, 5.2 percentage points lower than the 58.6 percent registered in February. The March reading is the 21st in a row near or below 70 percent (with 11 out of 12 straight months at or below 60 percent, from April 2023 through March 2024), following 10 straight months of readings near or above 80 percent.

Thirteen services industries reported an increase in prices paid during the month of March, in the following order: Construction; Agriculture, Forestry, Fishing & Hunting; Health Care & Social Assistance; Public Administration; Wholesale Trade; Other Services; Professional, Scientific & Technical Services; Information; Utilities; Retail Trade; Finance & Insurance; Educational Services; and Transportation & Warehousing. The two industries reporting a decrease in prices for March are: Real Estate, Rental & Leasing; and Management of Companies & Support Services.

NOTE: Commodities reported as up in price and down in price are listed in the commodities section of this report.

Backlog of Orders
The ISM^® Services Backlog of Orders Index dropped back into contraction after two consecutive months of expansion preceded by two months in contraction. The index reading of 44.8 percent is 5.5 percentage points lower than the 50.3 percent reported in February. Of the total respondents in March, 44 percent indicated they do not measure backlog of orders. Respondent comments include: "Fewer orders for unit from month to month" and "Sales have increased, but our production has been hampered with rain."

The six industries reporting an increase in order backlogs in March, in order, are: Retail Trade; Agriculture, Forestry, Fishing & Hunting; Educational Services; Construction; Finance & Insurance; and Utilities. The eight industries reporting a decrease in order backlogs in March — in the following order —are: Other Services; Real Estate, Rental & Leasing; Public Administration; Management of Companies & Support Services; Information; Professional, Scientific & Technical Services; Wholesale Trade; and Health Care & Social Assistance.

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 increased in March for the fifth consecutive month after a sizeable decline into contraction in October preceded by six consecutive months of expansion. The New Export Orders Index registered 52.7 percent, a 1.1-percentage point increase from the 51.6 percent reported in February. Of the total respondents in March, 65 percent indicated they do not perform, or do not separately measure, orders for work outside of the U.S.

The five industries reporting an increase in new export orders in March are: Professional, Scientific & Technical Services; Transportation & Warehousing; Educational Services; Information; and Wholesale Trade. The two industries reporting a decrease in new export orders in March are: Real Estate, Rental & Leasing; and Accommodation & Food Services. Eleven industries reported no change in new export orders in March.

Imports
The Imports Index expanded at a slower rate in March, registering 52.4 percent, 1.9 percentage points lower than February's reading of 54.3 percent. The index has indicated expansion in 16 of the last 19 months, with contractions in March and December of 2023 and an "unchanged" status (a reading of 50 percent) in May. Sixty-six percent of respondents reported that they do not use, or do not track the use of, imported materials.

The six industries reporting an increase in imports for the month of March, in order, are: Accommodation & Food Services; Agriculture, Forestry, Fishing & Hunting; Retail Trade; Management of Companies & Support Services; Utilities; and Wholesale Trade. The two industries reporting a decrease in imports in March are: Educational Services; and Professional, Scientific & Technical Services. Ten industries reported no change in imports in March.

Inventory Sentiment
The ISM^® Services Inventory Sentiment Index grew for the 11th consecutive month in March after one month of contraction in April 2023, preceded by four consecutive months of growth and four months of contraction from August to November 2022. The index registered 55.7 percent, a 1-percentage point decrease from February's figure of 56.7 percent. This reading indicates that respondents feel their inventories are too high when correlated to business activity levels.

The nine industries reporting sentiment that their inventories were too high in March — listed in order — are: Other Services; Utilities; Wholesale Trade; Information; Construction; Mining; Health Care & Social Assistance; Public Administration; and Retail Trade. The two industries reporting a feeling that their inventories were too low in March are: Transportation & Warehousing; and Professional, Scientific & Technical Services. Six industries indicated no change in inventory sentiment in March.

About This Report
DO NOT CONFUSE THIS NATIONAL REPORT with the various regional purchasing reports released across the country. The national report's information reflects the entire U.S., while the regional reports contain primarily regional data from their local vicinities. Also, the information in the regional reports is not used in calculating the results of the national report. The information compiled in this report is for the month of March 2024.

The data presented herein is obtained from a survey of supply executives in the services sector based on information they have collected within their respective organizations. ISM^® makes no representation, other than that stated within this release, regarding the individual company data collection procedures. The data should be compared to all other economic data sources when used in decision-making.

Data and Method of Presentation
The Services ISM^® Report On Business^® (formerly the Non-Manufacturing ISM^® Report On Business^®) is based on data compiled from purchasing and supply executives nationwide. Membership of the Services Business Survey Committee (formerly Non-Manufacturing Business Survey Committee) is diversified by NAICS, based on each industry's contribution to gross domestic product (GDP). The Services Business Survey Committee responses are divided into the following NAICS code categories: Agriculture, Forestry, Fishing & Hunting; Mining; Utilities; Construction; Wholesale Trade; Retail Trade; Transportation & Warehousing; Information; Finance & Insurance; Real Estate, Rental & Leasing; Professional, Scientific & Technical Services; Management of Companies & Support Services; Educational Services; Health Care & Social Assistance; Arts, Entertainment & Recreation; Accommodation & Food Services; Public Administration; and Other Services (services such as Equipment & Machinery Repairing; Promoting or Administering Religious Activities; Grantmaking; Advocacy; and Providing Dry-Cleaning & Laundry Services, Personal Care Services, Death Care Services, Pet Care Services, Photofinishing Services, Temporary Parking Services, and Dating Services). The data are weighted based on each industry's contribution to GDP. According to BEA estimates (the average of the fourth quarter 2022 GDP estimate and the GDP estimates for first, second, and third quarter 2023, as released on December 21, 2023), the six largest services sectors are: Real Estate, Rental & Leasing; Public Administration; Professional, Scientific, & Technical Services; Health Care & Social Assistance; Information; and Finance & Insurance.

Survey responses reflect the change, if any, in the current month compared to the previous month. For each of the indicators measured (Business Activity, New Orders, Backlog of Orders, New Export Orders, Inventory Change, Inventory Sentiment, Imports, Prices, Employment and Supplier Deliveries), this report shows the percentage reporting each response and the diffusion index. Responses represent raw data and are never changed. Data is seasonally adjusted for Business Activity, New Orders, Prices and Employment. All seasonal adjustment factors are subject annually to relatively minor changes when conditions warrant them. The remaining indexes have not indicated significant seasonality.

The Services PMI^® is a composite index based on the diffusion indexes for four of the indicators with equal weights: Business Activity (seasonally adjusted), New Orders (seasonally adjusted), Employment (seasonally adjusted) and Supplier Deliveries. Diffusion indexes have the properties of leading indicators and are convenient summary measures showing the prevailing direction of change and the scope of change. An index reading above 50 percent indicates that the services economy is generally expanding; below 50 percent indicates that it is generally declining. Supplier Deliveries is an exception. A Supplier Deliveries Index above 50 percent indicates slower deliveries and below 50 percent indicates faster deliveries.

A Services PMI^® above 49 percent, over time, indicates that the overall economy, or gross domestic product (GDP), is generally expanding; below 49 percent, it is generally declining. The distance from 50 percent or 49 percent is indicative of the strength of the expansion or decline.

The Services ISM^® Report On Business^® survey is sent out to Services Business Survey Committee respondents the first part of each month. Respondents are asked to ONLY report on U.S. operations for the current month. ISM^® receives survey responses throughout most of any given month, with the majority of respondents generally waiting until late in the month to submit responses to give the most accurate picture of current business activity. ISM^® then compiles the report for release on the third business day of the following month.

The industries reporting growth, as indicated in the Services ISM^® Report On Business^® monthly report, are listed in the order of most growth to least growth. For the industries reporting contraction or decreases, those are listed in the order of the highest level of contraction/decrease to the least level of contraction/decrease.

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About Institute for Supply Management^®
Institute for Supply Management^® (ISM^®) is the first and leading not-for-profit professional supply management organization worldwide. Its community of more than 50,000 in more than 100 countries manage about US$1 trillion in corporate and government supply chain procurement annually. Founded in 1915 by practitioners, ISM is committed to advancing the practice of supply management to drive value and competitive advantage for its members, contributing to a prosperous and sustainable world. ISM empowers and leads the profession through the ISM^® Report On Business^®, its highly-regarded certification and training programs, corporate services, events, and assessments. The ISM^® Report On Business^®, Manufacturing, Services, and Hospital, are three of the most reliable economic indicators available, providing guidance to supply management professionals, economists, analysts, and government and business leaders. For more information, please visit: www.ismworld.org.

The full text version of the Services ISM^® Report On Business^® is posted on ISM^®'s website at www.ismrob.org on the third business day* of every month after 10:00 a.m. ET. The one exception is in January, the report is released on the fourth business day of the month.

The next Services ISM^® Report On Business^® featuring April 2024 data will be released at 10:00 a.m. ET on Friday, May 3, 2024.

*Unless the New York Stock Exchange is closed.

SOURCE Institute for Supply Management