Economic activity expands in March
Economic activity in the services sector expanded for the ninth consecutive month in March, say the nation’s purchasing and supply executives in the latest Services ISM Report On Business. The Services PMI registered 50.8%, indicating expansion for the 55th time in 58 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 March, the Services PMI registered 50.8%, 2.7 percentage points lower than the February figure of 53.5%. The Business Activity Index registered 55.9% in March, 1.5 percentage points higher than the 54.4% recorded in February. This is the index’s 58th consecutive month of expansion. The New Orders Index recorded a reading of 50.4% in March, 1.8 percentage points lower than the February figure of 52.2%. The Employment Index dropped into contraction territory for its first time in six months; the reading of 46.2% is a 7.7-percentage point decrease compared to the 53.9% recorded in February.
“The Supplier Deliveries Index registered 50.6%, 2.8 percentage points lower than the 53.4% recorded in February. This is the fourth consecutive month the index has been in expansion territory, indicating slower supplier delivery performance. (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 60.9% in March, a 1.7-percentage point decrease from February’s reading of 62.6%, a fourth consecutive reading above 60%. The Inventories Index registered its second consecutive month in expansion territory in March, registering 50.3%, a decrease of 0.3 percentage point from February’s figure of 50.6%. The Inventory Sentiment Index expanded for the 23rd consecutive month, registering 56.6%, up 1.9 percentage points from February’s reading of 54.7%. The Backlog of Orders Index registered 47.4% in March, a 4.3-percentage point decrease from the February figure of 51.7%, indicating contraction for the seventh time in the last eight months dating back to August.
“Ten industries reported growth in March, a drop of four from the 14 industries reported in each of the previous two months. The Services PMI® has expanded in 55 of the last 58 months dating back to June 2020. The March reading of 50.8% is 2.7 percentage points below the February reading of 53.5%, and it is the lowest Services PMI® reading since June 2024 (49.2 percent).”
Miller continues, “March saw drops in the readings of three (New Orders, Employment and Supplier Deliveries) of the four subindexes that directly factor into the Services PMI®. Only Business Activity saw an increase over February’s reading. Employment was the only one of these subindexes to drop into contraction territory after three straight months with all four in expansion. There has been a significant increase this month in the number of respondents reporting cost increases due to tariff activity. Despite an increase in comments on tariff impacts and continuing concerns over potential tariffs and declining governmental spending, there was a close balance in near-term sentiment, between panelists with good outlooks and those seeing or expecting declines.”
INDUSTRY PERFORMANCE
The 10 services industries reporting growth in March — listed in order — are: Accommodation & Food Services; Transportation & Warehousing; Finance & Insurance; Wholesale Trade; Public Administration; Utilities; Agriculture, Forestry, Fishing & Hunting; Construction; Real Estate, Rental & Leasing; and Retail Trade. The seven industries reporting a contraction in the month of March — listed in order — are: Management of Companies & Support Services; Professional, Scientific & Technical Services; Other Services; Arts, Entertainment & Recreation; Educational Services; Health Care & Social Assistance; and Information.
WHAT RESPONDENTS ARE SAYING
- “Restaurant sales and traffic have improved in the past month overall. Valentine's Day typically starts an improved seasonal trend that was consistent this year. We remain optimistic about the coming months, despite recent news of possible recession and tariffs that have not played out yet.” [Accommodation & Food Services]
- “Starting to see effect of aluminum tariff. These costs will be passed on to customers.” [Construction]
- “Patient volumes continue to exceed forecast, leading to increased revenues and an improved financial outlook. Supply chains continue to operate effectively and few categories — including IV solutions — are showing signs of duress. Labor outlook is improving, with reliance on travel staff continuing to recede. Outlook for the duration of the quarter is favorable.” [Health Care & Social Assistance]
- “The tariffs have caused issues in the groundwood paper market especially. With a large amount of groundwood imported from Canada to the U.S., the tariffs and resulting delays have caused havoc with the supply chain and deliveries. U.S. mills are getting backlogged and late from the additional tonnage they've taken on.” [Information]
- “New equipment purchases have slowed down over the last month due to the uncertainty of the new administration and cancellation of certain aspects of the Inflation Reduction Act.” [Other Services]
- “We are seeing some loosening in the U.S. economy related to hiring and people retention. Quality candidates are available, and employee turnover is decreasing. Competitive pressure for goods and services is increasing as suppliers seek organic increases in revenue.” [Professional, Scientific & Technical Services]
- “Government budget cuts and layoffs are negatively impacting our operations.” [Public Administration]
- “We are still holding back some money for emergency use in case the new administration targets grant usage and puts a hold on current spending.” [Transportation & Warehousing]
- “We’re expecting price increases in the near future due to tariffs on several commodity-based contracts, including waterworks items.” [Utilities]
- “Tariff confusion and the variety of ways that suppliers are responding have had a strong effect on our purchasing decisions this month, causing us to shift spend and in some cases buy in advance of reported tariffs.” [Wholesale Trade]
INDUSTRIAL SUPPLY MAGAZINE
The March/April issue of Industrial Supply magazine features an in-depth cover story about Industrial Supply Co. Plus, we're featuring articles by contributing writers Dr. Bharani Nagarathnam and Frank Hurtte, as well as interviews with numerous product and distribution industry experts.
