Service sector expands, wholesale trade makes the growth list
Economic activity in the services sector expanded for the sixth consecutive month in December, say the nation’s purchasing and supply executives in the latest Services ISM Report On Business. The Services PMI registered 54.1%, indicating expansion for the 52nd time in 55 months since recovery from the coronavirus pandemic-induced recession began in June 2020.
The report was issued by Steve Miller, CPSM, CSCP, Chair of the Institute for Supply Management (ISM) Services Business Survey Committee: “In December, the Services PMI registered 54.1%, 2 percentage points higher than November’s figure of 52.1%. The reading in December marked the 10th time the composite index has been in expansion territory this year. The Business Activity Index registered 58.2% in December, 4.5 percentage points higher than the 53.7% recorded in November, indicating a sixth consecutive month of expansion and finishing the year with its third-highest reading for 2024. The New Orders Index recorded a reading of 54.2% in December, 0.5 percentage point higher than November’s figure of 53.7%. The Employment Index remained in expansion territory for the fifth time in six months; the reading of 51.4% is a 0.1-percentage point decrease compared to the 51.5% recorded in November.
“The Supplier Deliveries Index registered 52.5%, 3 percentage points higher than the 49.5% recorded in November. The index returned to expansion territory — indicating slower supplier delivery performance — to split the year, with six months each in expansion and contraction. (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 64.4% in December, a 6.2-percentage point increase from November’s reading of 58.2%. This month’s reading is the first time the index has registered over 60% since January. The Inventories Index stayed in contraction territory in December for the second month after three months in expansion, registering 49.4%, an increase of 3.5 percentage points from November’s figure of 45.9%. The Inventory Sentiment Index expanded for the 20th consecutive month, registering 53.4%, down 1.2 percentage points from November’s reading of 54.6%. The Backlog of Orders Index remained in contraction territory for a fifth consecutive month, registering 44.3% in December, a 2.8-percentage point decrease from the November reading of 47.1%.
“Nine industries reported growth in December, five fewer than the previous month’s total. The Services PMI has expanded in 22 of the last 24 months dating back to January 2023, and the December reading is the third highest of 2024.”
Miller continues, “The Services PMI in December was boosted primarily by strength in the Business Activity and Supplier Deliveries indexes. Many industries noted that end-of-year and seasonal factors were helping drive business activity or impact inventory management. Some of the increased business activity seems to have been driven by preparation for demand in the new year, or risk management for impacts from ports strikes and potential tariffs. There was general optimism expressed across many industries, but tariff concerns elicited the most panelist comments.”
INDUSTRY PERFORMANCE
The nine services industries reporting growth in December — listed in order — are: Finance & Insurance; Arts, Entertainment & Recreation; Retail Trade; Health Care & Social Assistance; Transportation & Warehousing; Public Administration; Accommodation & Food Services; Wholesale Trade; and Utilities. The six industries reporting a contraction in the month of December — listed in order — are: Real Estate, Rental & Leasing; Educational Services; Agriculture, Forestry, Fishing & Hunting; Professional, Scientific & Technical Services; Information; and Management of Companies & Support Services.
SOME RESPONDENTS SAID
- “Customers are slowing down, and they are cutting back their inventories in preparation for the end of the year, so our sales are slowing down.” [Wholesale Trade]
- “New residential construction remains hampered by interest rates and affordability issues. Tariff threats from incoming administration have been making suppliers reluctant to hold pricing for more than one year. As projects can take two-plus years, budgeting is getting difficult, similar to 2021 and 2022, when supply chain disruptions caused chaos in pricing.” [Construction]
- “Seems to be a lot of uncertainty about tariffs and purchasing decisions. A lot of wait and see.” [Transportation & Warehousing]
- “General business conditions are still going well. The end of (2024) is approaching, so end-of-year preparations are in full swing.” [Utilities]
INDUSTRIAL SUPPLY MAGAZINE
The November/December issue of Industrial Supply magazine features an in-depth cover story about Kimball Midwest. Plus, we're featuring articles by contributing writers Dirk Beveridge, Frank Hurtte, and Mike Marks, as well as interviews with numerous product and distribution industry experts.
