October Service PMI in 'expansion territory'
Economic activity in the services sector expanded for the fourth consecutive month in October, say the nation’s purchasing and supply executives in the latest Services ISM Report On Business. The Services PMI registered 56%, which is the highest reading since July 2022 and indicates sector expansion for the 50th time in 53 months.
The report was issued today by Steve Miller, CPSM, CSCP, Chair of the Institute for Supply Management (ISM) Services Business Survey Committee: “In October, the Services PMI registered 56%, 1.1 percentage points higher than September’s figure of 54.9%. 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%.
“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% for 2024.”
Miller continues, “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. 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.”
INDUSTRY PERFORMANCE
The 14 services industries reporting growth in October — listed in order — are: Retail Trade; Information; Transportation & Warehousing; Accommodation & Food Services; Finance & Insurance; Construction; Mining; Public Administration; Utilities; Real Estate, Rental & Leasing; Educational Services; Professional, Scientific & Technical Services; Health Care & Social Assistance; and Wholesale Trade. The two industries reporting a contraction in the month of October are: Other Services; and Management of Companies & Support Services.
WHAT RESPONDENTS ARE SAYING
• “Material availability and delivery continues to improve. The port strike had an impact, as we had to divert shipments, but the overall costs are not material. Services cost remains elevated but easier to negotiate.” [Accommodation & Food Services]
• “Monitoring inventories much closer than in the past. We’re refilling inventories for the fall and winter seasons are lower level than normal, but those decisions are easy to understand.” [Agriculture, Forestry, Fishing & Hunting]
• “Business is good. Building backlog. Commercial Construction is strong. Commercial Service is busy. All other areas are level.” [Construction]
• “Hurricane Helene seriously damaged an IV production plant in North Carolina, which was 60% of all national supply of IV bag fluid/solution. We are now starting to experience shortages. In addition, two hurricanes hit Florida, which impacted many of our lab vendors. Plus, the port workers’ strike impacts shipments of materials that our (U.S.) labs use to manufacture medicine and medical supplies. We anticipate a rise in prices and longer wait times, and most likely, shortages of some supplies.” [Health Care & Social Assistance]
• “Sadly, the recent hurricanes/tornadoes, and any future climate-related catastrophes, are good for the equipment sales and rental businesses. That and the continued infrastructure spending.” [Information]
• “Revenue cycles are lengthening. Good sales, but longer service periods. Commodity pricing is stabilizing as inflation concerns ease. Business is in a steady state, with everyone holding an even keel awaiting U.S. election results.” [Professional, Scientific & Technical Services]
• “Hurricane impacts have affected supplier deliveries.” [Real Estate, Rental & Leasing]
• “Port strikes did not impact our supply chain, but we confirmed all our strategic vendors had plans in place should they have an impact.” [Retail Trade]
• “Business is booming, nothing slowing down. Prices continue to increase slightly.” [Utilities]
• “The economy is still causing issues within our business and that of our suppliers.” [Wholesale Trade]
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.
