Services PMI™ at 57.8%; September 2020 Services ISM® Report On Business®

Business Activity Index at 63.0%; New Orders Index at 61.5%; Employment Index at 51.8%; Supplier Deliveries Index at 54.9%

TEMPE, Ariz., Oct. 5, 2020 /PRNewswire/ -- Economic activity in the services sector grew in September for the fourth month in a row, say the nation's purchasing and supply executives in the latest Services ISM^® Report On Business^®.

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: "The Services PMI^™ registered 57.8 percent, 0.9 percentage point higher than the August reading of 56.9 percent. This reading represents growth in the services sector for the fourth straight month and the 126th time in the last 128 months, except for April's and May's contraction.

"The Supplier Deliveries Index registered 54.9 percent, down 5.6 percentage points from August's reading of 60.5 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 figure of 59 percent is 5.2 percentage points lower than the August reading of 64.2 percent, indicating that prices increased in September at a slower rate. According to the Services PMI^™, 16 services industries reported growth. The composite index indicated growth for the fourth consecutive month after contraction in April and May. Respondents' comments remain mostly optimistic about business conditions and the economy, which correlates directly to those businesses that are operating. There continues to be capacity and logistics issues, as business volumes have increased," says Nieves.

INDUSTRY PERFORMANCE
The 16 services industries reporting growth in September — listed in order — are: Arts, Entertainment & Recreation; Utilities; Management of Companies & Support Services; Transportation & Warehousing; Health Care & Social Assistance; Wholesale Trade; Real Estate, Rental & Leasing; Accommodation & Food Services; Construction; Public Administration; Educational Services; Agriculture, Forestry, Fishing & Hunting; Finance & Insurance; Retail Trade; Information; and Other Services. The only industry reporting a decrease in September is Professional, Scientific & Technical Services.

WHAT RESPONDENTS ARE SAYING

• "Business has been fairly stable over the summer; however, there is still a great deal of uncertainty as we move into fall and winter [and] how our sales volume will be." (Agriculture, Forestry, Fishing & Hunting)
• "Our industry is facing a bleak outlook, as the Hollywood studios have pulled back almost all of their content from October and November and moved it into next year. Coupled with the state health mandates restricting our attendance, we expect to operate at a loss in 2020 and 2021." (Arts, Entertainment & Recreation)
• "Work orders are improving rapidly. Lack of available labor is having a significant impact on our ability to fulfill orders." (Construction)
• "As a public state university, our economic forecast is dependent upon our campus remaining open and students on campus. Currently, our students are on campus, but we have a reduced footprint with a 25-percent decrease in students living in university-provided housing. Enrollment was down 2 percent and most attribute that to COVID-19. Many students choose to stay close to home and attend classes at their local university or community college. Overall, our revenue will be down slightly this year, as long as our campus remains open. If we have to send students home due to a COVID-19 outbreak, then we will experience a drastic reduction in our revenue." (Educational Services)
• "Insurance industry will experience some impact from weather- and protest-related property damage and business interruption." (Finance & Insurance)
• "Elective procedures remain at near-historic levels, even with periodic and small [coronavirus] spikes within the region. Our organization is rolling back and approving some — not all — of the capital projects previously approved for this year and starting to regroup and plan/budget for 2021. We continue to have furloughed staff in more administrative roles than clinical, and shared services staff that are working well in the alternative work environments will not return until (at the earliest) mid next year.  Our productivity remains high, possibly higher, than when we are in our offices, at least for shared-services roles that are having no information technology [IT] issues. We are starting to see an increase in backorders and rejections from our main vendors. End-of-year typically brings more discontinuations and catalog consolidations from vendors, and on top of COVID-19 product issues, resources are being stretched further again." (Health Care & Social Assistance)
• "Activity level is holding steady, with optimistic outlook." (Mining)
• "Customer confidence creeping back as a belief in the end, or perhaps taming, of COVID-19 increases; however, it comes with a high degree of caution regarding uncertainty in the marketplace and a reluctance to commit. Exploratory conversations are increasing, but hard orders are not." (Professional, Scientific & Technical Services)
• "Business has come back solidly since mid-July, with a strong August and September. However, suppliers are plagued with lead-time challenges driven by (1) cautionary practices in terms of rebuilding capacity, (2) hiring difficulties for those trying to build capacity and (3) the impact of recent hurricanes in some regions." (Retail Trade)
• "Very good sales trend in home-improvement product sales, but challenges on market conditions exist like limited ocean capacity from Asia to U.S., delays in port and rails as a result of COVID-19 pandemic impact." (Wholesale Trade)

Services ISM^® Report On Business^® data is seasonally adjusted for the Business Activity, New Orders, Prices and Employment 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
Copper; Corn; Disinfectant Supplies; Gasoline; Janitorial Chemicals (2); Janitorial Supplies (2); Labor (2); Labor — Construction; Labor — Temporary; Lumber; Lumber Products (5); Medical Supplies (8); Nitrile Gloves; Oriented Strand Board (OSB) (3); Personal Protective Equipment (PPE) (8); PPE — Masks* (2); PVC Products; Shingles (2); and Steel.

Commodities Down in Price
Fuel; Natural Gas; and PPE — Masks*.

Commodities in Short Supply
Disinfectant Wipes (5); Hand Sanitizer (7); Labor (4); Labor — Construction (4); Labor — Temporary (2); Lumber (2); Medical Supplies; N95 Masks (7); Nitrile Gloves (4); Paper Products; Personal Protective Equipment (PPE) (8); PPE — Gloves (6); PPE — Gowns (6); PPE — Masks (7); Sanitary Supplies (6); and Wipes (4).

Note: The number of consecutive months the commodity is listed is indicated after each item.
*Indicates both up and down in price.

SEPTEMBER 2020 SERVICES INDEX SUMMARIES

Services PMI^™

In September, the Services PMI^™ (formerly the Non-Manufacturing NMI^®) registered 57.8 percent, 0.9 percentage point higher than August's figure of 56.9 percent. The reading indicates the services sector grew for the fourth consecutive month after two months of contraction and 122 months of growth before that. A reading above 50 percent indicates the services sector economy is generally expanding; below 50 percent indicates the services sector is generally contracting.

A Services PMI^™ above 48.5 percent, over time, generally indicates an expansion of the overall economy. Therefore, the September Services PMI™ indicates expansion for a fourth straight month following two months of contraction and a preceding period of 128 months of growth. Nieves says, "The past relationship between the Services PMI^™ and the overall economy indicates that the Services PMI^™ for September (57.8 percent) corresponds to a 3.2-percent increase in real gross domestic product (GDP) on an annualized basis."

SERVICES PMI™ HISTORY

Business Activity
ISM^®'s Business Activity Index registered 63 percent in September, an increase of 0.6 percentage point from the August reading of 62.4 percent. This represents growth for the fourth consecutive month. Comments from respondents include: "End of fiscal year spending" and "Resuming projects placed on hold due to COVID-19."

The 16 industries reporting an increase in business activity for the month of September — listed in order — are: Arts, Entertainment & Recreation; Real Estate, Rental & Leasing; Utilities; Accommodation & Food Services; Management of Companies & Support Services; Transportation & Warehousing; Wholesale Trade; Health Care & Social Assistance; Educational Services; Finance & Insurance; Public Administration; Mining; Construction; Information; Other Services; and Professional, Scientific & Technical Services. The only industry reporting a decrease in business activity for the month of September is Agriculture, Forestry, Fishing & Hunting.

New Orders
ISM^®'s New Orders Index registered 61.5 percent, an increase of 4.7 percentage points from the August reading of 56.8 percent. New orders grew for the fourth consecutive month after two months of contraction and a preceding period of 128 consecutive months of expansion. Comments from respondents include: "Business activity resumes as retail activity picks up" and "Increase in demand as businesses reopen and more people are driving."

The 14 industries reporting growth of new orders in September — listed in order — are: Arts, Entertainment & Recreation; Real Estate, Rental & Leasing; Utilities; Health Care & Social Assistance; Wholesale Trade; Educational Services; Management of Companies & Support Services; Other Services; Transportation & Warehousing; Accommodation & Food Services; Mining; Public Administration; Finance & Insurance; and Information. The two industries reporting contraction in September are: Agriculture, Forestry, Fishing & Hunting; and Retail Trade.

Employment
Employment activity in the services sector grew in September after six months of contraction, a period preceded by 72 consecutive months of growth. ISM^®'s Services Employment Index registered 51.8 percent, up 3.9 percentage points from the August reading of 47.9 percent. Comments from respondents include: "Calling back furloughed employees due to higher surgical volumes" and "We continue to hire to meet increased demand."

The nine industries reporting an increase in employment in September — listed in order — are: Arts, Entertainment & Recreation; Transportation & Warehousing; Utilities; Agriculture, Forestry, Fishing & Hunting; Wholesale Trade; Health Care & Social Assistance; Management of Companies & Support Services; Public Administration; and Construction. The six industries that reported a reduction in employment in September — listed in order — are: Mining; Educational Services; Information; Professional, Scientific & Technical Services; Other Services; and Finance & Insurance.

Supplier Deliveries
The Supplier Deliveries Index registered 54.9 percent, which is 5.6 percentage points lower than the 60.5 percent reported in August. A reading above 50 percent indicates slower deliveries, while a reading below 50 percent indicates faster deliveries. Comments from respondents include: "Suppliers were not ready for volume of new business" and "Slower trucking, reduced manufacturing capacities, and rail car shortages."

The 13 industries reporting slower deliveries in September — listed in order — are: Agriculture, Forestry, Fishing & Hunting; Management of Companies & Support Services; Construction; Transportation & Warehousing; Retail Trade; Utilities; Health Care & Social Assistance; Accommodation & Food Services; Information; Wholesale Trade; Public Administration; Educational Services; and Finance & Insurance. The two industries reporting faster deliveries in September are: Real Estate, Rental & Leasing; and Other Services.

Inventories
The Inventories Index contracted in September for the second consecutive month after two previous months of growth. The reading of 48.8 percent was a 3-percentage point increase from the 45.8 percent reported in August. Of the total respondents in September, 33 percent indicated they do not have inventories or do not measure them. Comments from respondents include: "Lowering inventory as we close our fiscal year in September" and "We have focused this year on reducing inventory."

The seven industries reporting an increase in inventories in September — listed in order — are: Educational Services; Retail Trade; Health Care & Social Assistance; Finance & Insurance; Wholesale Trade; Information; and Public Administration. The seven industries reporting a decrease in inventories in September — listed in order — are: Arts, Entertainment & Recreation; Real Estate, Rental & Leasing; Mining; Accommodation & Food Services; Agriculture, Forestry, Fishing & Hunting; Other Services; and Construction.

Prices
Prices paid by service organizations for materials and services increased in September, with the index registering 59 percent. This is 5.2 percentage points lower than the 64.2 percent reported in August.

The 11 service industries that reported an increase in prices paid during the month of September — listed in order — are: Wholesale Trade; Health Care & Social Assistance; Construction; Real Estate, Rental & Leasing; Retail Trade; Management of Companies & Support Services; Finance & Insurance; Agriculture, Forestry, Fishing & Hunting; Professional, Scientific & Technical Services; Transportation & Warehousing; and Educational Services. The three industries that reported a decrease in prices in September are: Accommodation & Food Services; Other Services; and Information.

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 grew in September for the fourth consecutive month. The index registered 50.1 percent; 6.5 percentage points lower than the 56.6 percent reported in August. Of the total respondents in September, 37 percent indicated they do not measure backlog of orders.

The seven industries reporting an increase in order backlogs in September — listed in order — are: Arts, Entertainment & Recreation; Wholesale Trade; Management of Companies & Support Services; Mining; Health Care & Social Assistance; Finance & Insurance; and Educational Services. The seven industries that reported a decrease in backlogs in September — listed in order — are: Retail Trade; Agriculture, Forestry, Fishing & Hunting; Other Services; Construction; Information; Professional, Scientific & Technical Services; and Utilities.

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 September for the second consecutive month. The New Export Orders Index registered 52.6 percent in September, which is 3.2 percentage points lower than the 55.8 percent reported in August. Of the total respondents in September, 71 percent indicated they either do not perform, or do not separately measure, orders for work outside of the U.S.

The six industries reporting an increase in new export orders in September — listed in order — are: Arts, Entertainment & Recreation; Transportation & Warehousing; Real Estate, Rental & Leasing; Wholesale Trade; Finance & Insurance; and Health Care & Social Assistance. The five industries that reported a decrease in exports in September are: Utilities; Management of Companies & Support Services; Educational Services; Other Services; and Retail Trade. Seven industries reported no change in September.

Imports
The Services Imports Index contracted, as it registered 46.6 percent in September, 4.2 percentage points lower than August's figure of 50.8 percent. Seventy-five percent of respondents reported that they do not use, or do not track the use of, imported materials.

The five industries reporting an increase in imports for the month of September are: Arts, Entertainment & Recreation; Other Services; Wholesale Trade; Utilities; and Health Care & Social Assistance. The five industries that reported a decrease in imports in September are: Real Estate, Rental & Leasing; Retail Trade; Agriculture, Forestry, Fishing & Hunting; Information; and Construction. Eight industries reported no change in imports in September.

Inventory Sentiment
The ISM^® Services Inventory Sentiment Index in September registered 55.4 percent, which is 2.9 percentage points higher than the 52.5-percent reading in August. This indicates that respondents believe their inventories are too high.

The nine industries reporting sentiment that their inventories were too high in September — listed in order — are: Arts, Entertainment & Recreation; Mining; Information; Public Administration; Wholesale Trade; Health Care & Social Assistance; Transportation & Warehousing; Educational Services; and Utilities. The three industries reporting a feeling that their inventories were too low in September are: Agriculture, Forestry, Fishing & Hunting; Finance & Insurance; and Construction. Six industries reported no change in inventory sentiment in September.

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 September 2020.

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).

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 48.5 percent, over time, indicates that the overall economy, or gross domestic product (GDP), is generally expanding; below 48.5 percent, it is generally declining. The distance from 50 percent or 48.5 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.

ISM ROB Content
The Institute for Supply Management^® ("ISM") Report On Business^® (Manufacturing, Services and Hospital reports) ("ISM ROB") contains information, text, files, images, video, sounds, musical works, works of authorship, applications, and any other materials or content (collectively, "Content") of ISM ("ISM ROB Content"). ISM ROB Content is protected by copyright, trademark, trade secret, and other laws, and as between you and ISM, ISM owns and retains all rights in the ISM ROB Content. ISM hereby grants you a limited, revocable, nonsublicensable license to access and display on your individual device the ISM ROB Content (excluding any software code) solely for your personal, non-commercial use. The ISM ROB Content shall also contain Content of users and other ISM licensors. Except as provided herein or as explicitly allowed in writing by ISM, you shall not copy, download, stream, capture, reproduce, duplicate, archive, upload, modify, translate, publish, broadcast, transmit, retransmit, distribute, perform, display, sell, or otherwise use any ISM ROB Content.

Except as explicitly and expressly permitted by ISM, you are strictly prohibited from creating works or materials (including, but not limited to: tables, charts, data streams, time-series variables, fonts, icons, link buttons, wallpaper, desktop themes, online postcards, montages, mashups and similar videos, greeting cards, and unlicensed merchandise) that derive from or are based on the ISM ROB Content. This prohibition applies regardless of whether the derivative works or materials are sold, bartered, or given away. You shall not either directly or through the use of any device, software, internet site, web-based service, or other means remove, alter, bypass, avoid, interfere with, or circumvent any copyright, trademark, or other proprietary notices marked on the Content or any digital rights management mechanism, device, or other content protection or access control measure associated with the Content including geo-filtering mechanisms. Without prior written authorization from ISM, you shall not build a business utilizing the Content, whether or not for profit.

You shall not create, recreate, distribute, incorporate in other work, or advertise an index of any portion of the Content unless you receive prior written authorization from ISM. Requests for permission to reproduce or distribute ISM ROB Content can be made by contacting in writing at: ISM Research, Institute for Supply Management, 309 W. Elliot Road, Suite 113, Tempe, AZ 85284-1556, or by emailing [email protected]; subject: Content Request.

ISM shall not have any liability, duty, or obligation for or relating to the ISM ROB Content or other information contained herein, any errors, inaccuracies, omissions or delays in providing any ISM ROB Content, or for any actions taken in reliance thereon. In no event shall ISM be liable for any special, incidental, or consequential damages, arising out of the use of the ISM ROB. Report On Business^®, Manufacturing PMI^®, Services PMI^™, and Hospital PMI^™ are registered trademarks of Institute for Supply Management^®. Institute for Supply Management^® and ISM^® are registered trademarks of Institute for Supply Management, Inc.

About Institute for Supply Management^®
Institute for Supply Management^® (ISM^®) serves supply management professionals in more than 90 countries. Its 50,000 members around the world manage about US$1 trillion in corporate and government supply chain procurement annually. Founded in 1915 as the first supply management institute in the world, 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 leads the profession through the ISM Report On Business^®, its highly regarded certification programs and the ISM Mastery Model^®. This report has been issued by the association since 1931, except for a four-year interruption during World War II.

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 next Services ISM^® Report On Business^® featuring October 2020 data will be released at 10:00 a.m. ET on Wednesday, November 4, 2020.

*Unless the New York Stock Exchange is closed.

SOURCE Institute for Supply Management

Related Links

https://www.ismworld.org

WANT YOUR COMPANY'S NEWS FEATURED ON PRNEWSWIRE.COM?

440k+
Newsrooms &
Influencers

9k+
Digital Media
Outlets

270k+
Journalists
Opted In

GET STARTED