Economic Activity in the Services Sector Expands in June for 6th Consecutive Month
According to the latest Services ISM Report on Business from the Institute for Supply Management, economic activity in the services sector expanded in June for the sixth consecutive month as the Services PMI registered 53.9%. The sector has grown in 36 of the last 37 months, with the lone contraction in December of last year.
“In June, the Services PMI registered 53.9 %, 3.6 percentage points higher than May’s reading of 50.3%. The composite index indicated growth in June for the sixth consecutive month after a reading of 49.2% in December, which was the first contraction since May 2020 (45.4%),” Anthony Nieves, CPSM, CPM, APP, CFPM, chair of the Institute for Supply Management’s services business survey committee, said. “The Business Activity Index registered 59.2%, a 7.7-percentage point increase compared to the reading of 51.5% in May. The New Orders Index expanded in June for the sixth consecutive month after contracting in December for the first time since May 2020; the figure of 55.5% is 2.6 percentage points higher than the May reading of 52.9%.
“The Supplier Deliveries Index registered 47.6%, 0.1 percentage point lower than the 47.7% recorded in May. In the last six months, the average reading of 47.9% (with a low of 45.8% in March) reflects the fastest supplier delivery performance since June 2009, when the index registered 46%. (Supplier Deliveries is the only ISM Report on Business index that is inversed; a reading of above 50% indicates slower deliveries, which is typical as the economy improves and customer demand increases.)
“The Prices Index was down 2.1 percentage points in June, to 54.1%. The Inventories Index expanded in June for the second consecutive month, after one month of contraction preceded by two months of growth and eight months of contraction from June 2022 to January 2023; the reading of 55.9% is down 2.4 percentage points from May’s figure of 58.3%,” Nieves said. “The Inventory Sentiment Index (54%, down 7 percentage points from May’s reading of 61%) expanded for the second consecutive month after one month of contraction preceded by four months of growth, with a four-month period of contraction before that. The Backlog of Orders Index registered 43.9%, a 3-percentage point increase compared to the May figure of 40.9%, which was the index’s lowest reading since May 2009 (40%).
“Fifteen industries reported growth in June. The Services PMI, by being above 50% for the sixth month after a single month of contraction and a prior 30-month period of expansion, continues to indicate sustained growth for the sector. The composite index has indicated expansion for all but three of the previous 160 months.”
“There has been an uptick in the rate of growth for the services sector. This is due mostly to the increase in business activity, new orders and employment,” Nieves said. “Increased capacity, backlog reduction and continued improvements in logistics have impacted delivery times (resulting in a decrease in the Supplier Deliveries Index). The majority of respondents indicate that business conditions remain stable; however, they are cautious relative to inflation and the future economic outlook.”
The 15 services industries that reported growth in June — listed in order — were: accommodation and food services; arts, entertainment and recreation; real estate, rental and leasing; public administration; educational services; management of companies and support services; transportation and warehousing; wholesale trade; other services; utilities; professional, scientific and technical services; construction; finance and insurance; retail trade; and health care and social assistance. The three industries that reported a decrease in the month of June were agriculture, forestry, fishing and hunting; mining; and information.