U.S. ISM Services PMI Improves in October; Prices Ease
by:Tom Moeller
|in:Economy in Brief
Summary
- Index level is highest in over two years.
- Business activity & employment firm.
- Despite a modest backpedal, prices reading remains firm.
The U.S. ISM Services Purchasing Managers Index rose to 56.0 in October from 54.9 in September. It was the highest level since July 2022, according to the Institute for Supply Management. The index is up from a four-year low 48.8 in June. The Action Economics Forecast Survey expected a reading of 53.5 for October.
Haver Analytics constructs a composite index combining the services index and the manufacturing reading released on Friday. This index improved to 54.8 in October after rising to 53.9 in September, indicating an increase in activity for the fourth month in the last five. The latest figure was well above a four-year-low 48.8 in June. These series date back to July 1997.
In the latest services survey, the business activity index declined to 57.2 in October from 59.9 in September. The index was up from its recent low of 49.6 in June but below a record high 69.5 in November 2021. A lessened 22.5% of respondents (NSA) reported higher activity in October while a fairly steady 8.5% reported an activity decline. The new orders index weakened to 57.4 in October from 59.4 in September. The index remained up from its recent low of 47.3 in June but down from a record high 69.5 in October 2021. A lessened 20.8% of respondents (NSA) reported higher orders last month and a lessened 8.1% reported a decline. Meanwhile, the supplier deliveries index (NSA) rose to 56.4 from 52.1 in September, indicating slower supplier delivery performance.
On the jobs front, the employment index strengthened to 53.0 in October from 48.1 in September, indicating a rise in services sector employment. The latest reading was above a low of 43.8 in December 2023, but below a high of 54.1 in August 2023. An increased 17.9% of respondents (NSA) indicated higher employment in October while 14.1% reported a decline.
Regarding inflation, the prices index fell to 58.1 in October after an increase to 59.4 in September, indicating a continued rise in prices paid. The index was increased from its recent low of 53.4 in March but below a record-high 83.8 in March 2022. A lessened 20.5% of respondents (NSA) reported price increases in October and a lessened 4.7% reported price declines.
Additionally, the new export orders index declined to 51.7 in October following an increase to 56.7 in September. Nonetheless, new export orders rose eleven times in the last twelve months. The imports index fell to 50.2 in October from 52.7 in September. The inventory change index declined to 57.2 in October from 58.1 in September, though inventories expanded for the third consecutive month. The order backlog index fell to 47.7 last month after rising to 48.3 in September. These series are not seasonally adjusted and not included in the ISM Services PMI total.
The ISM Services PMI is a composite index consisting of 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.
Tom Moeller
AuthorMore in Author Profile »Prior to joining Haver Analytics in 2000, Mr. Moeller worked as the Economist at Chancellor Capital Management from 1985 to 1999. There, he developed comprehensive economic forecasts and interpreted economic data for equity and fixed income portfolio managers. Also at Chancellor, Mr. Moeller worked as an equity analyst and was responsible for researching and rating companies in the economically sensitive automobile and housing industries for investment in Chancellor’s equity portfolio. Prior to joining Chancellor, Mr. Moeller was an Economist at Citibank from 1979 to 1984. He also analyzed pricing behavior in the metals industry for the Council on Wage and Price Stability in Washington, D.C. In 1999, Mr. Moeller received the award for most accurate forecast from the Forecasters' Club of New York. From 1990 to 1992 he was President of the New York Association for Business Economists. Mr. Moeller earned an M.B.A. in Finance from Fordham University, where he graduated in 1987. He holds a Bachelor of Arts in Economics from George Washington University.
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