U.S. ISM Services PMI Drops to a Five-Month Low in October
Summary
- 51.8 in Oct. vs. 53.6 in Sept., showing expansions in services since Jan. ’23.
- Indexes for Business Activity and Employment fall to a five-month low; Supplier Deliveries Index declines to a seven-month low.
- New Orders Index rebounds to 55.5.
- Prices Index eases to 58.6, albeit remaining above 50 since June ’17.
The U.S. ISM Services PMI fell to 51.8 in October from 53.6 in September and 54.5 in August, according to today’s report by the Institute for Supply Management, indicating expansion for the 10th consecutive month but at the slowest pace since May. The October reading, while slightly up from a low of 49.2 in December 2022, was below 54.5 in October 2022 and a peak of 67.6 in November 2021. The 12-month average was 52.9, reflecting strong growth in the U.S. services sector. The Action Economics Forecast Survey had expected 53.2 for October.
Haver Analytics constructs a composite index combining the services index and the manufacturing reading. This index declined to 51.2 in October after falling to 53.0 in September, showing expansion for the fifth successive month but at the slowest rate since May. These readings remained down from 53.9 in October 2022 and a record 66.8 in November 2021. These series date back to July 1997.
In the latest services survey, the business activity index fell to 54.1 in October after rising to 58.8 in September, indicating business activity expanded for the 41st straight month but at the slowest pace since May. The index was below 55.6 in October 2022 and a record 70.4 in November 2021. A 22.3% of respondents (NSA) reported higher activity in October while 16.2% reported an activity decline. The employment index dropped to 50.2 in October from 53.4 in September, showing the slowest rate of expansion in five months; however, the index was higher than a contraction-level 49.2 in October last year. A 15.8% of respondents (NSA) indicated higher employment in October while an increased 17.2% reported a decline.
To the upside, the new orders index rose to 55.5 in October after declining to 51.8 in September, indicating expansion for the 10th successive month at a faster pace. The index, while up from a low of 45.2 in December 2022, was below 56.8 in October 2022 and a record 69.2 in October 2021. A 22.9% of respondents (NSA) reported higher orders in October while 17.2% reported a decline.
The supplier deliveries index (NSA) fell to 47.5 in October, the lowest reading since March, after rising to 50.4 in September. The index, while slightly up from a low of 45.8 in March, was below 56.2 in October 2022 and a high of 75.7 in November 2021. An increased 9.2% of respondents (NSA) reported faster delivery speeds in October while 4.2% reported slower speeds.
On the inflation front, the prices index slipped to 58.6 in October from 58.9 in both September and August, indicating prices paid by services organizations for materials and services had risen (i.e., above 50) since June 2017. The latest reading was up from a low of 54.1 in June but well below 70.9 in October 2022 and a record 84.5 in December 2021. An increased 24.7% of respondents (NSA) reported price rises in October while only 8.7% reported price decreases.
Additionally, the new export orders index plunged to 48.8 in October after rising to 63.7 in September, indicating new export orders contracted for the first time since March. The inventory change index dropped to 49.5 in October from 54.2 in September, indicating inventories contracted for the first time since April. The inventory sentiment index declined to 54.4 in October from 54.8 in September, showing expansion for the sixth consecutive month but at the slowest pace since June. In contrast, the imports index jumped to 60.0 in October from 50.6 in September, registering the seventh straight expansion at the fastest pace since December 2006. The backlog of orders index rose to 50.9 in October from 48.6 in September, showing expansion in the latest month following two successive months of contraction. These series are not seasonally adjusted and not included in the ISM Services PMI total.
The ISM Services PMI is a composite index consisting four equally weighted diffusion indexes (25% each): Business Activity, New Orders, Employment, and Supplier Deliveries. A reading above 50 indicates expansion in the services sector; below 50 suggests contraction. Supplier Deliveries is the only ISM index that is inversed; a reading above 50 indicates slower deliveries. The ISM figures are available in Haver’s USECON database, with additional detail in the SURVEYS database. The expectations figure from Action Economics is in the AS1REPNA database.
Winnie Tapasanun
AuthorMore in Author Profile »Winnie Tapasanun has been working for Haver Analytics since 2013. She has 20+ years of working in the financial services industry. As Vice President and Economic Analyst at Globicus International, Inc., a New York-based company specializing in macroeconomics and financial markets, Winnie oversaw the company’s business operations, managed financial and economic data, and wrote daily reports on macroeconomics and financial markets. Prior to working at Globicus, she was Investment Promotion Officer at the New York Office of the Thailand Board of Investment (BOI) where she wrote monthly reports on the U.S. economic outlook, wrote reports on the outlook of key U.S. industries, and assisted investors on doing business and investment in Thailand. Prior to joining the BOI, she was Adjunct Professor teaching International Political Economy/International Relations at the City College of New York. Prior to her teaching experience at the CCNY, Winnie successfully completed internships at the United Nations. Winnie holds an MA Degree from Long Island University, New York. She also did graduate studies at Columbia University in the City of New York and doctoral requirements at the Graduate Center of the City University of New York. Her areas of specialization are international political economy, macroeconomics, financial markets, political economy, international relations, and business development/business strategy. Her regional specialization includes, but not limited to, Southeast Asia and East Asia. Winnie is bilingual in English and Thai with competency in French. She loves to travel (~30 countries) to better understand each country’s unique economy, fascinating culture and people as well as the global economy as a whole.
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