Services PMI® at 58.7%; January 2021 Services ISM® Report On Business®

Business Activity Index at 59.9%; New Orders Index at 61.8%; Employment Index at 55.2%; Supplier Deliveries Index at 57.8%

This report reflects the recently completed annual adjustments to the seasonal factors used to calculate the indexes.

TEMPE, Ariz., Feb. 3, 2021 /PRNewswire/ -- Economic activity in the services sector grew in January for the eighth 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 58.7 percent, 1 percentage point higher than the seasonally adjusted December reading of 57.7 percent. This reading is the highest since February 2019 (58.8 percent) and indicates the eighth straight month of growth for the services sector, which has expanded for all but two of the last 132 months.

"The Supplier Deliveries Index registered 57.8 percent, down 5 percentage points from December's reading of 62.8 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 64.2 percent is 0.2 percentage point lower than the seasonally adjusted December reading of 64.4 percent, indicating that prices increased in January, and at a slower rate. According to the Services PMI^®, 14 services industries reported growth. The composite index indicated growth for the eighth consecutive month after a two-month contraction in April and May. There was continued growth in the services sector for the month of January. Respondents' comments are more optimistic about business conditions and the economy. Various local- and state-level COVID-19 restrictions continue to negatively impact companies and industries. Production capacity and logistics issues continue to cause supply chain challenges," says Nieves.

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

WHAT RESPONDENTS ARE SAYING

• "Many of our restaurant locations remain completely shut down to on-site dining. We remain optimistic about business trends beyond April/May 2021. [We] have a very challenging few months to go." (Accommodation & Food Services)
• "Orders for new business have picked up. Labor is still the major impediment to the business." (Construction)
• "Seasonal reduction of activity due to winter break from campus activity." (Educational Services)
• "Start of 2021 on track with a positive outlook." (Finance & Insurance)
• "Increased number of COVID-19 patients has forced the cancellation of elective surgeries. Bed capacity limited." (Health Care & Social Assistance)
• "The copper shortage is slowing deliveries of key network equipment." (Information)
• "Still working under COVID-19 restrictions and uncertain political climate." (Mining)
• "Overall, everything continues to be more optimistic; however, we are still seeing impacts from suppliers that are being affected by limiting staff due to COVID-19 restrictions." (Other Services)
• "Post-holidays spending is up. Many capital projects and expenditures are coming to fruition." (Public Administration)
• "Business outlook for 2021 looks better. Companies are optimistic that conditions will start improving by the end of the second quarter." (Retail Trade)
• "Business outlook for 2021 is positive with projects and capital investments moving forward. Target financial objectives have been obtained." (Utilities)
• "Good start to the year; business has promising growth. Market conditions are still affected by logistics issues, both domestic and international. Also, prices for raw material prices and freight are increasing up, by 4 percent to 13 percent." (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
Aluminum; Copper; Copper Wire (2); Diesel (2); Exam Gloves (4); Freight (2); Fuel; Gasoline (2); Gloves (2); Interior Door Slabs; Isolation Gowns; Labor (2); Labor — Temporary; Lumber; Nitrile Gloves (5); Oriented Strand Board (2); Personal Protective Equipment (PPE) (12); PPE — Gloves (4); Pharmaceuticals; Polyvinyl Chloride (PVC) Products (5); Rebar; Resin Products; Steel (5); Steel Products; and Transportation.

Commodities Down in Price
None.

Commodities in Short Supply
Appliances; Computer Equipment; Construction Contractors (4); Corrugate; Electrical Components (2); Gloves (2); Labor (2); Labor — Construction; Labor — Temporary; Lumber; N95 Masks (11); Needles & Syringes (2); Nitrile Gloves (8); Oriented Strand Board; Personal Protective Equipment (PPE) (12); PPE — Gloves (10); PPE — Masks; Pipette Tips; Steel Products (2); and Tubing.

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

JANUARY 2021 SERVICES INDEX SUMMARIES

Services PMI^®

In January, the Services PMI^® registered 58.7 percent, 1 percentage point higher than seasonally adjusted December figure of 57.7 percent. This reading indicates the services sector grew for the eighth 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 49.2 percent, over time, generally indicates an expansion of the overall economy. Therefore, the January Services PMI^® indicates expansion for an eighth 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 January (58.7 percent) corresponds to a 3.4 -percent increase in real gross domestic product (GDP) on an annualized basis."

SERVICES PMI^® HISTORY

Business Activity
ISM^®'s Business Activity Index registered 59.9 percent in January, a decrease of 0.6 percentage point from the seasonally adjusted December reading of 60.5 percent. This represents growth for the eighth consecutive month. Comments from respondents include: "Business activity has improved due to people adjusting to the current environment" and "Increase in prospects and orders."

The 10 industries reporting an increase in business activity for the month of January — listed in order — are: Construction; Finance & Insurance; Real Estate, Rental & Leasing; Wholesale Trade; Accommodation & Food Services; Health Care & Social Assistance; Professional, Scientific & Technical Services; Public Administration; Utilities; and Information. The two industries reporting a decrease are: Retail Trade; and Educational Services. Six industries reported no change in January compared to December.

New Orders
ISM^®'s New Orders Index registered 61.8 percent, an increase of 3.2 percentage points from the seasonally adjusted December reading of 58.6 percent. New orders grew for the eighth consecutive month after two months of contraction and a preceding period of 128 months of expansion. Comments from respondents include: "We appear to be picking up, as our customers are starting to pull the trigger on new project spend" and "Higher order levels due to enhanced promotions and seasonal activity."

The eight industries reporting growth of new orders in January — listed in order — are: Real Estate, Rental & Leasing; Finance & Insurance; Agriculture, Forestry, Fishing & Hunting; Wholesale Trade; Construction; Transportation & Warehousing; Information; and Professional, Scientific & Technical Services. The three industries reporting a decrease in January are: Arts, Entertainment & Recreation; Accommodation & Food Services; and Educational Services. Seven industries reported no change in January compared to December.

Employment
Employment activity in the services sector grew in January after contracting in December. After 72 straight pre-pandemic months of expansion, the index contracted from March through August. ISM^®'s Services Employment Index registered 55.2 percent in January, up 6.5 percentage points from the seasonally adjusted December reading of 48.7 percent. Comments from respondents include: "New hires required to perform awarded work in 2021" and "Trying to replace and build staff in critical areas."

The eight industries reporting an increase in employment in January are: Management of Companies & Support Services; Real Estate, Rental & Leasing; Construction; Finance & Insurance; Accommodation & Food Services; Health Care & Social Assistance; Public Administration; and Wholesale Trade. The six industries that reported a reduction in employment in January — listed in order — are: Retail Trade; Information; Educational Services; Transportation & Warehousing; Utilities; and Professional, Scientific & Technical Services.

Supplier Deliveries
The Supplier Deliveries Index registered 57.8 percent, which is 5 percentage points lower than the 62.8 percent reported in December. A reading above 50 percent indicates slower deliveries, while a reading below 50 percent indicates faster deliveries. Comments from respondents include: "Longer production schedules and shipping time," and "Labor issues, port congestion and trucking delays."

The 13 industries reporting slower deliveries in January — listed in order — are: Transportation & Warehousing; Wholesale Trade; Accommodation & Food Services; Retail Trade; Health Care & Social Assistance; Other Services; Mining; Agriculture, Forestry, Fishing & Hunting; Construction; Information; Management of Companies & Support Services; Educational Services; and Professional, Scientific & Technical Services. The only industry reporting faster deliveries in January is Utilities.

Inventories
The Inventories Index contracted in January after the prior month of growth. The reading of 49.2 percent was a 9-percentage point decrease from the 58.2 percent reported in December. Of the total respondents in January, 38 percent indicated they do not have inventories or do not measure them. Comments from respondents include: "Consumption of inventory levels" and "Inbound inventory can't keep up with the demand."

The seven industries reporting an increase in inventories in January — listed in order — are: Finance & Insurance; Educational Services; Other Services; Health Care & Social Assistance; Utilities; Public Administration; and Information. The six industries reporting a decrease in inventories in January — listed in order — are: Arts, Entertainment & Recreation; Transportation & Warehousing; Real Estate, Rental & Leasing; Mining; Retail Trade; and Professional, Scientific & Technical Services.

Prices
Prices paid by service organizations for materials and services increased in January, with the index registering 64.2 percent. This is 0.2 percentage point lower than the seasonally adjusted 64.4 percent reported in December.

The 16 services industries that reported an increase in prices paid during the month of January — listed in order — are: Wholesale Trade; Construction; Agriculture, Forestry, Fishing & Hunting; Retail Trade; Accommodation & Food Services; Mining; Arts, Entertainment & Recreation; Transportation & Warehousing; Health Care & Social Assistance; Professional, Scientific & Technical Services; Public Administration; Utilities; Management of Companies & Support Services; Other Services; Finance & Insurance; and Educational Services. No industry reported a decrease in prices paid for January.

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 January for the seventh time in the last eight months. The index registered 50.9 percent; 2.2 percentage points higher than the 48.7 percent reported in December. Of the total respondents in January, 43 percent indicated they do not measure backlog of orders.

The eight industries reporting an increase in order backlogs in January — listed in order — are: Accommodation & Food Services; Health Care & Social Assistance; Retail Trade; Construction; Finance & Insurance; Transportation & Warehousing; Professional, Scientific & Technical Services; and Wholesale Trade. The five industries that reported a decrease in backlogs in January are: Arts, Entertainment & Recreation; Agriculture, Forestry, Fishing & Hunting; Management of Companies & Support Services; Other Services; and Public Administration.

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 contracted in January after five consecutive months of growth. The New Export Orders Index registered 47 percent in January, which is 10.3 percentage points lower than the 57.3 percent reported in December. Of the total respondents in January, 79 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 January — listed in order — are: Agriculture, Forestry, Fishing & Hunting; Health Care & Social Assistance; Utilities; Wholesale Trade; Transportation & Warehousing; and Professional, Scientific & Technical Services. The six industries that reported a decrease in exports in January — listed in order — are: Accommodation & Food Services; Retail Trade; Real Estate, Rental & Leasing; Other Services; Construction; and Information. Six industries reported no change in January.

Imports
The Imports Index grew at a faster rate in January, as it registered 53.5 percent, 1.7 percentage points higher than December's figure of 51.8 percent. Sixty-eight percent of respondents reported that they do not use, or do not track the use of, imported materials.

The eight industries reporting an increase in imports for the month of January — listed in order — are: Transportation & Warehousing; Real Estate, Rental & Leasing; Educational Services; Retail Trade; Agriculture, Forestry, Fishing & Hunting; Health Care & Social Assistance; Wholesale Trade; and Professional, Scientific & Technical Services. The three industries reporting a decrease in imports in January are: Construction; Management of Companies & Support Services; and Information. Seven industries reported no change.

Inventory Sentiment
The ISM^® Services Inventory Sentiment Index in January registered 49.7 percent, which is 2 percentage points higher than the 47.7 percent reading in December. This is only the fourth month — the others are March, November and December 2020 — in which respondents indicated they believe their inventories are too low since the inception of the Services (formerly Non-Manufacturing) ISM^® Report On Business^® in 1997.

The eight industries reporting sentiment that their inventories were too high in January — listed in order — are: Arts, Entertainment & Recreation; Other Services; Mining; Utilities; Construction; Information; Health Care & Social Assistance; and Public Administration. The five industries reporting a feeling that their inventories were too low in January are: Transportation & Warehousing; Real Estate, Rental & Leasing; Retail Trade; Professional, Scientific & Technical Services; and Wholesale Trade.

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 January 2021.

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 49.2 percent, over time, indicates that the overall economy, or gross domestic product (GDP), is generally expanding; below 49.2 percent, it is generally declining. The distance from 50 percent or 49.2 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^®) 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 February 2021 data will be released at 10:00 a.m. ET on Wednesday, March 3, 2021.

*Unless the New York Stock Exchange is closed.

SOURCE Institute for Supply Management

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