Services PMI® at 50 6%; December 2023 Services ISM® Report On Business®

Trends can go on for months, which is valuable for analysts who focus on making long-term economic forecasts. Data sources for peer group comparisons, returns, and standard statistical data are provided by the sources referenced and are based on data obtained from recognized statistical services or other sources believed to be reliable. However, some or all of the information has not been verified prior to the analysis, and we do not make any representations as to its accuracy or completeness. Any analysis nonfactual in nature constitutes only current opinions, which are subject to change. Benchmarks or indices are included for information purposes only to reflect the current market environment; no index is a directly tradable investment. There may be instances when consultant opinions regarding any fundamental or quantitative analysis may not agree.

  1. Having weathered that storm, there’s growing evidence that the manufacturing sector may be close to finding a bottom as the economy more broadly decelerates toward trend growth.
  2. Monetary policy that’s too tight for too long, potentially pushing not just the manufacturing sector but the economy more broadly into recession.
  3. The distance from 50 percent or 49.9 percent is indicative of the strength of the expansion or decline.
  4. TEMPE, Ariz., Dec. 5, 2022 /PRNewswire/ — Economic activity in the services sector grew in November for the 30th month in a row — with the Services PMI® registering 56.5 percent — say the nation’s purchasing and supply executives in the latest Services ISM® Report On Business®.
  5. The distance from 50 percent or 50.1 percent is indicative of the strength of the expansion or decline.

The ISM Manufacturing Index, commonly known as the ISM Manufacturing Purchasing Managers Index (ISM PMI), is a monthly gauge of the level of economic activity in the manufacturing sector in the United States versus the previous month. Conversely, the Manufacturing PMI report (formerly the ISM Manufacturing Index) surveys manufacturers to determine the level of output and economic activity in production facilities as well as the commodity purchases and inventory that are used to produce those goods. Improvement in new order books also contributed to a modest uptick in production, but employers remain slow to hire.

The Institute also releases a Semi-Annual Economic Forecast in May and December. The ISM manufacturing index, also known as the purchasing managers’ index (PMI), is a monthly indicator of U.S. economic activity based on a survey of purchasing managers at more than 300 manufacturing firms. Formally called the Manufacturing ISM Report on Business, the survey is conducted by the Institute for Supply Management (ISM). The overall trend in inventory levels, and whether they’re increasing or decreasing, can help provide insight as to the level of demand for the services within specific industries. If demand is high, leading to lower inventory levels, it can be a leading economic indicator as to the health of consumer spending in the economy.

Historical Data

The prices paid for services and goods by companies can be an indicator of inflation, which is a measure of how much prices increase in an economy. Higher prices could also be an indicator of a shortage in supply for particular goods. The sector has grown in 42 of the last 43 months, with the lone contraction in December 2022. Inventory SentimentThe ISM® Services Inventory Sentiment Index contracted in September for the second straight month and the 16th time in the last 18 months. The index registered 47.2 percent, a 0.1-percentage point increase from August’s figure of 47.1 percent. ImportsThe Imports Index grew in September after three consecutive months of contraction, registering 51.3 percent, up 3.1 percentage points from August’s reading of 48.2 percent.

Definition of ‘ISM Services Index’

In November, the Services PMI® registered 56.5 percent, a 2.1-percentage point increase compared to the October reading of 54.4 percent. The 12-month average is 57.2 percent, reflecting consistently strong growth in the services sector, which has expanded for 30 consecutive months. A reading above 50 percent indicates the services sector economy is generally expanding; below 50 percent indicates it is generally contracting. The monthly announcement of the ISM manufacturing index can greatly influence investor and business confidence. This is because the index is a survey of purchasing managers and supply management executives who are at the forefront of their companies’ supply chains. Purchasing managers are in the best position to assess the ebb and flow of business conditions.

As such, it is widely followed by economists, analysts, government, business leaders, and supply management professionals. The example above from December 2022 was the first time since May 2022 that the manufacturing sector had contracted. The ISM manufacturing index or PMI measures the change in production levels across the U.S. economy from month to month. Thus, it is one of the earliest indicators of economic activity that investors and business people get regularly. The manufacturing sector has been in contraction for over a year — an exceptionally long period for an economy that has been in expansion.

What Is the Current ISM Manufacturing Index?

When used alongside the ISM Manufacturing PMI, the industry coverage between the two reports account for a significant portion of the goods and services produced in the U.S. economy—measured by gross domestic product (GDP). The ISM Manufacturing Index is published monthly and is an important leading indicator of the U.S. economy. The reason that this economic indicator is forward-looking is how far ahead purchasing decisions need to be made for future manufacturing needs.

The report also shows the industries that experienced growth in business activity compared to the prior month while showing which industries contracted. Headlining the report was the first expansionary reading on New Orders since August 2022. The New Orders index rose over 5 points to 52.5 in January, with 20% of survey respondents reporting an increase in orders. PricesPrices paid by services organizations for materials and services increased in September for the 64th consecutive month, with the index registering 68.7 percent, 2.8 percentage points lower than the 71.5 percent recorded in August.

Services PMI® at 56.5%; November 2022 Services ISM® Report On Business®

Inventory levels are tracked each month to show whether there’s a reported increase or decrease. For example, if a company experienced no sales growth, its inventory levels might have remained the same due to a lack of demand. The ISM report has several components that measure business growth or contraction, as well as many other factors that go into the supply management process. The Purchasing Managers’ Index (PMI) is a barometer on the overall economy by showing the economic trends in both the manufacturing and service sectors.

He currently researches and teaches economic sociology and the social studies of finance at the Hebrew University in Jerusalem. Plante Moran Financial Advisors (PMFA) publishes this update to convey general information about market conditions and not for the purpose of providing investment advice. Investment in any of the companies or sectors mentioned herein may not be appropriate for you. You should consult a representative from PMFA for investment advice regarding your own situation. US ISM Services Prices Paid Index is at a current level of 57.40, down from 58.30 last month and down from 68.10 one year ago. Gold faced volatility last week but returned to Friday’s lows amid a recovering US dollar and slightly higher bond yields
Conflicting signals from Friday’s job data and ISM report created uncertainty,…

Financial Services & Investing

An index of more than 50 indicates an expansion in the manufacturing segment of the economy in comparison with the previous month while a reading of 50 indicates no change and a reading below 50 suggests a contraction of the manufacturing sector. The ISM manufacturing index is a composite index that gives equal weighting to new orders, production, employment, supplier deliveries, and inventories. The organization releases its Report on Business, which includes the Manufacturing Purchasing Managers’ Index (PMI) and the Services (or non-manufacturing) PMI.

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. 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.

The ISM Report On Business provides guidance to supply management professionals, business leaders, economists, and government officials by monitoring the economic conditions of the nation. Monetary policy that’s too tight for too long, potentially pushing not just the manufacturing sector but the economy more broadly into recession. A broad view of economic indicators today can be used to create convincing arguments for either a soft landing or hard landing scenario. The surprising strength of consumer spending in the latter half of last year kept the economy on a firm footing but appear more vulnerable as labor conditions ease. Going forward, a continuation of the expansion appears to be a tug-of-war between labor market and wage strength supporting spending and Fed policy aimed at cooling inflation and taking some of the heat out of pace of growth and labor demand.

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 easymarkets 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® Advance™ Digital Platform. This report has been issued by the association since 1931, except for a four-year interruption during World War II.