by Calculated Risk on 4/05/2023 10:04:00 AM

(Posted with permission). The ISM® Services index was at 51.2%, down from 55.1% last month. The employment index decreased to 51.3%, from 54.0%. Note: Above 50 indicates expansion, below 50 in contraction.

From the Institute for Supply Management: Services PMI® at 51.2% March 2023 Services ISM® Report On Business®

Economic activity in the services sector expanded in March for the third consecutive month as the Services PMI® registered 51.2 percent, say the nation's purchasing and supply executives in the latest Services ISM® Report On Business®. The sector has grown in 33 of the last 34 months, with the lone contraction in December.

The report was issued today by Anthony Nieves, CPSM, C.P.M., A.P.P., CFPM, Chair of the Institute for Supply Management® (ISM®) Services Business Survey Committee: “In March, the Services PMI® registered 51.2 percent, 3.9 percentage points lower than February’s reading of 55.1 percent. The composite index indicated growth in March for the third consecutive month after a reading of 49.2 percent in December, the first contraction since May 2020 (45.4 percent). The Business Activity Index registered 55.4 percent, a 0.9-percentage point decrease compared to the reading of 56.3 percent in February. The New Orders Index expanded in March for the third consecutive month after contracting in December for the first time since May 2020; the figure of 52.2 percent is 10.4 percentage points lower than the February reading of 62.6 percent.

“The Supplier Deliveries registered 45.8 percent, 1.8 percentage points lower than the 47.6 percent recorded in February. In the last two months, the index has reflected the fastest supplier delivery performance since April 2009, when it registered 45.5 percent. (Supplier Deliveries is the only ISM® Report On Business® index that is inversed; a reading of above 50 percent indicates slower deliveries, which is typical as the economy improves and customer demand increases.)

“The Prices Index was down 6.1 percentage points in March, to 59.5 percent. The Inventories Index grew in March for the second consecutive month after contracting for eight months in a row; the reading of 52.8 percent is up 2.2 percentage points from February’s figure of 50.6 percent. The Inventory Sentiment Index (57.9 percent, up 2.6 percentage points from February’s reading of 55.3 percent) expanded for the fourth consecutive month after a four-month period of contraction.

“Thirteen industries reported growth in March. The Services PMI®, by being above 50 percent for a third month after a single month of contraction and a prior 30-month period of expansion, continues to indicate sustained growth for the sector. The composite index has indicated expansion for all but three of the previous 158 months.”

Nieves continues, “There has been a pullback in the rate of growth for the services sector, attributed mainly to (1) a cooling off in the new orders growth rate, (2) an employment environment that varies by industry and (3) continued improvements in capacity and logistics, a positive impact on supplier performance. The majority of respondents report a positive outlook on business conditions.”
emphasis added

The PMI was much lower than expected and the employment index declined.