Economic activity in the services sector expanded in March for the 15th consecutive month as the services Purchasing Managers Index registered 51.4%, according to the Institute for Supply Management.
In March, the manufacturing index joined the service index in the expansion range, according to ISM.
In the ISM Services Report on Business for March, retail trade was among the sectors enjoying growth. Services sector growth has occurred in 45 of the past 46 months, with the lone contraction in December 2022.
Anthony Nieves, chair of the ISM Services Business Survey Committee, stated: “In March, the Services PMI registered 51.4%, 1.2 percentage points lower than February’s reading of 52.6%. The composite index indicated growth in March for the 15th consecutive month after a reading of 49% in December 2022, which was the first contraction since May 2020, 45.4%. The Business Activity Index registered 57.4% in March, which is 0.2 percentage point higher than the 57.2% recorded in February. The New Orders Index expanded in March for the 15th consecutive month after contracting in December 2022 for the first time since May 2020. The figure of 54.4% is 1.7 percentage points lower than the February reading of 56.1%. The Employment Index contracted for the third time in four months with a reading of 48.5%, a 0.5-percentage point increase compared to the 48% recorded in February.”
For its part, the Supplier Deliveries Index hit 45.4%, lower than the 48.9% recorded in February, Nieves said. “In the last 12 months, the average reading of 48.7%, with a low of 45.4% this month, reflects the fastest supplier delivery performance since December 2022, when the index registered 48.5%,” he added.
The Supplier Deliveries figure is the only 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 registered 53.4% in March, decrease from February’s reading of 58.6%, Nieves noted. The Inventories Index contracted in March for the fourth consecutive month, registering 45.6%, a decrease from February’s figure of 47.1%. The Inventory Sentiment Index, 55.7%, down slightly from February’s reading of 56.7%, expanded for the 11th consecutive month. The Backlog of Orders Index dropped into contraction in March after two consecutive months of expansion, registering 44.8%, a decrease compared to the February reading of 50.3%, Nieves said.
In March 12 services reported growth. The Services PMI, being above 50% for the 15th consecutive month after the single month of contraction in December 2022 and a prior 30-month period of expansion, continues to indicate sustained growth, if at a slower rate during the month, according to ISM.
“The decrease in the rate of growth in March and the decline in the composite index is a result of slower new orders growth, faster supplier deliveries and a contraction in employment,” Nieves pointed out. “The report continued to reflect growth month over month. Respondents indicated continuing improvement in logistics and the supply chain. Employment challenges remain a combination of difficulties in backfilling positions and/or controlling labor expenses. The Prices Index reflected its lowest reading since March 2020, when the index registered 50.4%. However, respondents indicated that even with some prices stabilizing, inflation is still a concern.”
The 12 services industries reporting growth in March are Accommodation & Food Services; Professional, Scientific & Technical Services; Agriculture, Forestry, Fishing & Hunting; Educational Services; Construction; Management of Companies & Support Services; Utilities; Retail Trade; Wholesale Trade; Other Services; Finance & Insurance, and Health Care & Social Assistance. Four industries reporting a March decline are: Mining; Transportation & Warehousing; Real Estate, Rental & Leasing and Information.
Economic activity in the manufacturing sector expanded in March after contracting for 16 consecutive months. It registered 50.3% just over the 50% border between sector expansion and contraction, up 2.5 percentage points from the 47.8% recorded in February. However, ISM made the point that the overall economy gained for the 47th month after one month of contraction in April 2020, as a sustained manufacturing index score above 42.5% generally indicates an expansion of the general economy.
Four of the six biggest manufacturing industries registered growth in March: Food, Beverage & Tobacco Products; Fabricated Metal Products; Chemical Products and Transportation Equipment.
