Home ISM: Services Sector Gained in July Versus June
August 9, 2022

ISM: Services Sector Gained in July Versus June

Posted In: Retail Articles

Although it wasn’t the best month for retail, economic activity in the services sector grew in July for the 26th month in a row, with the Institute for Supply Management Purchasing Managers Index registering 56.7%.

Indeed, the July number pushed away from the 50% line that separates growth from contraction. Anthony Nieves, chair of the ISM Services Business Survey Committee, pointed out that the July figure came in 1.4 percentage points higher than June’s reading of 55.3%.

“The Business Activity Index registered 59.9%, an increase of 3.8 percentage points compared to the reading of 56.1% in June,” he added. “The New Orders Index figure of 59.9% is 4.3 percentage points higher than the June reading of 55.6%. The Supplier Deliveries Index registered 57.8%, 4.1 percentage points lower than the 61.9% reported in June.”

Supplier Deliveries is the only Report On Business index that is inverse so that a reading of above 50% indicates slower deliveries, which is typical as the economy improves and customer demand advances.

“The Prices Index decreased for the third consecutive month in July, down 7.8 percentage points to 72.3%,” Nieves maintained. “Services businesses continue to struggle to replenish inventories, as the Inventories Index contracted for the second consecutive month. The reading of 45% is down 2.5 percentage points from June’s figure of 47.5%. The Inventory Sentiment Index, 50.1%, up 3.9 percentage points from June’s reading of 46.2%, moved into expansion territory in July after four consecutive months of contraction.”

Nieves noted that, in the Services PMI, 13 industries reported growth.

“The composite index indicated growth for the 26th consecutive month after a two-month contraction in April and May 2020,” he stated. “Growth continues at a faster rate for the services sector, which has expanded for all but two of the last 150 months. The slight increase in services sector growth was due to an increase in business activity and new orders. The Employment Index, 49.1%, contracted for the second consecutive month, and the Backlog of Orders Index decreased 2.2 percentage points, to 58.3%. Availability issues with overland trucking, a restricted labor pool, various material shortages and inflation continue to be impediments for the services sector.”

Of the 13 services industries reporting growth in July, the fastest gains were in Mining; Real Estate, Rental & Leasing, followed by Public Administration; Management of Cos. & Support Services; Construction; Educational Services; Other Services; Utilities; Professional, Scientific & Technical Services; Health Care & Social Assistance; Transportation & Warehousing; Wholesale Trade, and Information. The three industries that reported a July decline were Agriculture, Forestry, Fishing & Hunting; Retail Trade, and Finance & Insurance.

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