October's ISM PSI Services Index is up 4.5 percentage points from two months prior.
August was 51.5%, September was 54.9% and October's was at 56%.
The Services Institute for Supply Management (ISM) Report on Business, issued by the Institute for Supply Chain Management (ISM), measures economic growth and sentiment based upon surveys with industry executives in the services sector, which includes construction. A reading higher than 49 means the economy is expanding. Following are excerpts from some of those surveys.
- “Business is good. Building backlog. Commercial Construction is strong. Commercial Service is busy. All other areas are level.” [Construction]
- “Hurricane impacts have affected supplier deliveries.” [Real Estate, Rental & Leasing]
- “Business is booming, nothing slowing down. Prices continue to increase slightly.” [Utilities]
October's 56% reading is the highest since July 2022.
The report was issued today by Steve Miller, chair of the ISM Services Business Survey Committee:
“In October, the Services PMI registered 56%, 1.1 percentage points higher than September’s figure of 54.9%," he said. "The reading in October marked the eighth time the composite index has been in expansion territory this year. The Business Activity Index registered 57.2% in October, 2.7 percentage points lower than the 59.9% recorded in September, indicating a fourth month of expansion after a contraction in June. The New Orders Index decreased to 57.4% in October, 2 percentage points lower than September’s figure of 59.4%. The Employment Index landed in expansion territory for its third time in four months; the reading of 53% is a 4.9-percentage point increase compared to the 48.1% recorded in September."
The Supplier Deliveries Index registered 56.4%, 4.3 percentage points higher than the 52.1% recorded in September. The index remained in expansion territory for the second month in a row — indicating slower supplier delivery performance — after two months in contraction or ‘faster’ territory. 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 registered 58.1% in October, a 1.3-percentage point decrease from September’s reading of 59.4%. The Inventories Index remained in expansion territory for a third month in October after two consecutive months of contraction, registering 57.2%, a decrease of 0.9 percentage point from September’s figure of 58.1%. The Inventory Sentiment Index expanded for the 18th consecutive month, but the reading of 53%, down 1 percentage point from September’s reading of 54%, is its lowest in that time period. The Backlog of Orders Index remained in contraction territory for a third consecutive month, registering 47.7% in October, a 0.6-percentage point decrease from the September reading of 48.3%.
ISM
“Fourteen industries reported growth in October, up two from the 12 industries reporting growth in September. The Services PMI has expanded in 20 of the last 22 months dating back to January 2023, and the October reading is 3.7 percentage points above its average of 52.3 percent for 2024," Miller said.
Why the Increase?
To explain the increase in index numbers, Miller said:
“The increase in the Services PMI in October was driven by boosts of more than 4 percentage points for both the Employment and Supplier Deliveries indexes. The Business Activity and New Orders indexes both dropped by at least 2 percentage points," he said. "Each of the four subindexes are now above their averages for 2024. The Supplier Deliveries Index remained in expansion in October, indicating slower delivery performance. Concerns over political uncertainty were again more prevalent than the previous month. Impacts from hurricanes and ports labor turbulence were mentioned frequently, although several panelists mentioned that the longshoremen’s strike had less of an impact than feared due to its short duration.”
When it comes to the drop in New Orders, which registered 57.4% in October, 2 percentage points lower than the reading of 59.4 percent registered in September, survey respondents said “More construction requests” and “Slightly lower due to holding back funds until after the U.S. presidential election.”
Industry Performance
The 14 services industries reporting growth in October — listed in order — are: retail trade; information; transportation and warehousing; accommodation and food services; finance and insurance; construction; mining; public administration; utilities; real estate, rental and leasing; educational services; professional, scientific and technical services; health care and social assistance; and wholesale trade. The two industries reporting a contraction in the month of October are: other services; and management of companies and support services.
