Aksana Kavaleuskaya
By Jennifer Nash
The Institute of Supply Management (ISM) has released its July services purchasing managers’ index (PMI). The headline composite index is at 51.4, coming in line with the forecast. The latest reading moves the index back into expansion territory for the 47th time in the past 50 months.
Here is an excerpt from the report summary:
Miller continues, “The increase in the composite index in July is a result of an average increase of 5 percentage points for the Business Activity, New Orders, and Employment indexes, offset by the 4.6-point drop in the Supplier Deliveries Index. The last time Supplier Deliveries was in contraction (faster) territory while the other three indexes registered expansion was in November 2023. Survey respondents again reported that increased costs are impacting their businesses, with generally positive commentary on business activity being flat or expanding gradually. Comments continued to express a wait-and-see attitude regarding the upcoming presidential election, with one respondent expressing concern over potential increases in tariffs. Many panelists noted a return to more stable supply chain performance, albeit with higher costs.”
Unlike its much older kin, the ISM manufacturing series, there is relatively little history for ISM’s non-manufacturing data, especially for the headline composite index, which dates from 2008. The chart below shows the non-manufacturing composite.
The more interesting and useful sub-component is the non-manufacturing business activity index. The latest data point for July is 54.5%, up from last month.
For a diffusion index, this can be an extremely volatile indicator, hence the addition of a six-month moving average to help us visualize the short-term trends.
Theoretically, this indicator should become more useful as the time frame of its coverage expands. Manufacturing may be a more sensitive barometer than non-manufacturing activity, but we are increasingly a services-oriented economy, which explains our intention to keep this series on the radar.
Here is a table showing the trend in the underlying components.
Editor’s Note: The summary bullets for this article were chosen by Seeking Alpha editors.
