Services (NMI) August 2021 Report

Economic activity in the services sector grew in August for the 15th month in a row, say the nation’s purchasing and supply executives in the latest Services ISM® Report On Business®.

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: “The Services PMI® registered 61.7 percent, 2.4 percentage points lower than the all-time high reading of 64.1 in July. The August reading indicates the 15th straight month of growth for the services sector, which has expanded for all but two of the last 139 months.

“The Supplier Deliveries Index registered 69.6 percent, down 2.4 percentage points from July’s reading of 72 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 registered 75.4 percent, down 6.9 percentage points from the July figure of 82.3 percent.

“According to the Services PMI®, 17 services industries reported growth. The composite index indicated growth for the 15th consecutive month after a two-month contraction in April and May 2020. There was a pullback in the rate of expansion in the month of August; however, growth remains strong for the services sector. The tight labor market, materials shortages, inflation and logistics issues continue to cause capacity constraints,” says Nieves.

INDUSTRY PERFORMANCE

The 17 services industries reporting growth in August — listed in order — are: Accommodation & Food Services; Retail Trade; Construction; Educational Services; Information; Mining; Other Services; Utilities; Public Administration; Transportation & Warehousing; Health Care & Social Assistance; Wholesale Trade; Management of Companies & Support Services; Agriculture, Forestry, Fishing & Hunting; Finance & Insurance; Real Estate, Rental & Leasing; and Professional, Scientific & Technical Services. The only industry to report a decrease is Arts, Entertainment & Recreation.

WHAT RESPONDENTS ARE SAYING

  • “Supply chain disruptions — including manufacturing-labor shortages, logistics delays and lack of material to make products — are significantly disrupting our business.” [Accommodation & Food Services]
  • “There is a shortage of available workers which is challenging our business operations.” [Agriculture, Forestry, Fishing & Hunting]
  • “Material and labor shortages continue to hinder productivity. Price increases are ever-present and repetitive. Large, multinational manufacturers have had multiple price increases in the last three months.” [Construction]
  • “Budget constraints due to student enrollment (impacted by) COVID-19 restrictions. Outlook to remain flat or little increase. Supply chain constraints with regard to limited supply of computer hardware to fulfill orders.” [Educational Services]
  • “Inpatient- and outpatient-services and ancillary-services volumes continue to be very high. Driven by increased admissions and increased lengths of stay. Pharmaceutical volume is high as well, which relates to patient volume in our cancer center. Surgical-case volumes remain strong, as do associated physician services. Emergency room visits exceeded budgeted levels by 14.2 percent. This volume resulted in an increase in diagnostic services, specifically CT scans. In addition, we are seeing an increase in COVID-19 patients again.” [Health Care & Social Assistance]
  • “Supplies are tight in technology hardware.” [Information]
  • “Temporary labor continues to be in short supply. Transportation costs are inflating prices on all products.” [Management of Companies & Support Services]
  • “Activity level continues to increase.” [Mining]
  • “Continuing supply chain disruptions and supply cost increases.” [Professional, Scientific & Technical Services]
  • “Chemicals and transportation services are in short supply. Also, chip shortages are affecting several large-project time lines.” [Public Administration]
  • “Business in all segments continues to gain, both month over month and year-to-date versus 2020. Projections and forecasts remain quite robust.” [Real Estate, Rental & Leasing]
  • “A limited supply of critical items has caused us to expand our line of products and our supplier base. Services like ash cleaning, trash removal, internet installations and the like are experiencing staffing shortages, causing us to find alternative sources or adjust schedules. Travel has increased 60 percent since February for internal employees.” [Retail Trade]
  • “Steel shortages continue. Labor constraints at suppliers continue to push delivery dates out. Logistics issues (are also ongoing), as container space, truck drivers and the like remain difficult to obtain.” [Wholesale Trade]

ISM® SERVICES SURVEY RESULTS AT A GLANCE COMPARISON OF ISM® SERVICES AND ISM® MANUFACTURING SURVEYS*
August 2021

 Services PMI®Manufacturing PMI®
IndexSeries Index AugSeries Index JulPercent Point ChangeDirectionRate of ChangeTrend** (Months)Series Index AugSeries Index JulPercent Point Change
Services PMI®61.764.1-2.4GrowingSlower1559.959.5+0.4
Business Activity/ Production60.167.0-6.9GrowingSlower1560.058.4+1.6
New Orders63.263.7-0.5GrowingSlower1566.764.9+1.8
Employment53.753.8-0.1GrowingSlower249.052.9-3.9
Supplier Deliveries69.672.0-2.4SlowingSlower2769.572.5-3.0
Inventories46.949.2-2.3ContractingFaster354.248.9+5.3
Prices75.482.3-6.9IncreasingSlower5179.485.7-6.3
Backlog of Orders61.363.5-2.2GrowingSlower868.265.0+3.2
New Export Orders60.665.8-5.2GrowingSlower756.655.7+0.9
Imports48.751.6-2.9ContractingFrom Growing154.353.7+0.6
Inventory Sentiment41.440.3+1.1Too LowSlower5N/AN/AN/A
Customers’ InventoriesN/AN/AN/AN/AN/AN/A30.225.0+5.2
Overall EconomyGrowingSlower15
Services SectorGrowingSlower15

Services ISM® Report On Business® data is seasonally adjusted for the Business Activity, New Orders, Prices and Employment indexes. Manufacturing ISM® Report On Business® data is seasonally adjusted for New Orders, Production, Employment and Inventories indexes.
**Number of months moving in current direction.

COMMODITIES REPORTED UP/DOWN IN PRICE AND IN SHORT SUPPLY

Commodities Up in Price


Aluminum (2); Computer Hardware; Construction Contractors (2); Construction Materials; Copper Products (2); Diesel (9); Electrical Components (7); Fiber-Optic Cable (2); Freight (4); Freight — Less-Than-Truckload (LTL); Food and Beverages; Fuel (8); Gasoline (9); Labor (9); Labor — Construction; Labor — Temporary (8); Labor Benefits; Machinery Components; Metal Products (4); Packaging Materials (4); Pallets; Paper Products; Plastic Products; Plumbing Products (2); Polyvinyl Chloride (PVC) Conduit; Polyvinyl Chloride (PVC) Pipe and Fittings; Resin-Based Products (2); Steel (12); Steel — Hot Rolled; Steel — Stainless; Steel Products (8); Transportation Rates (2); and Wire and Cable.

Commodities Down in Price


Lumber (2).

Commodities in Short Supply


Chicken Wings; Computer Equipment; Construction Subcontractors; Electronic Components (5); Equipment Parts; Fiber-Optic Cable (2); Foley Catheter Insertion Trays; Food and Beverages; Lab Supplies; Labor; Labor — Temporary (8); Laptops and Desktop Computers; Metal Products; Microchips; Needles and Syringes; Pipette (6); Resin-Based Products; Steel Conduit; and Stretch Film.

Note: The number of consecutive months the commodity is listed is indicated after each item. *Indicates those commodities reported both up and down in price.


AUGUST 2021 SERVICES INDEX SUMMARIES


SERVICES PMI®

In August, the Services PMI® registered 61.7 percent, a 2.4-percentage point decrease compared to the July figure of 64.1 percent, the composite index’s highest reading since its debut in 2008. This reading indicates the services sector grew for the 15th consecutive month after two months of contraction and 122 months of growth before that. A reading above 50 percent indicates the services sector economy is generally expanding; below 50 percent indicates the services sector is generally contracting.

A Services PMI® above 49.2 percent, over time, generally indicates an expansion of the overall economy. Therefore, the August Services PMI® indicates expansion for a 15th straight month following two months of contraction and a preceding period of 127 months of growth. Nieves says, “The past relationship between the Services PMI® and the overall economy indicates that the Services PMI® for August (61.7 percent) corresponds to a 4.4-percent increase in real gross domestic product (GDP) on an annualized basis.”

SERVICES PMI® HISTORY

MonthSERVICES PMI®
Aug 202161.7
Jul 202164.1
Jun 202160.1
May 202164.0
Apr 202162.7
Mar 202163.7
MonthSERVICES PMI®
Feb 202155.3
Jan 202158.7
Dec 202057.7
Nov 202056.8
Oct 202056.2
Sep 202057.2

Average for 12 months – 59.9
High – 64.1
Low – 55.3


BUSINESS ACTIVITY

ISM®’s Business Activity Index registered 60.1 percent in August, a decrease of 6.9 percentage points from the July reading of 67 percent. This represents growth for the 15th consecutive month. Comments from respondents include: “Business is continuing at an aggressive pace; we are on track to hit our financial goals” and “Business activity remains high as a result of strong consumer and business demand.” Also, “High levels of pent-up demand and supply shortages.”

The 15 industries reporting an increase in business activity for the month of August — listed in order — are: Public Administration; Accommodation & Food Services; Educational Services; Other Services; Retail Trade; Health Care & Social Assistance; Utilities; Construction; Information; Agriculture, Forestry, Fishing & Hunting; Finance & Insurance; Transportation & Warehousing; Mining; Wholesale Trade; and Professional, Scientific & Technical Services. The two industries reporting a decrease in August are Arts, Entertainment & Recreation; and Real Estate, Rental & Leasing.

Business Activity% Higher% Same% LowerIndex
Aug 202131.254.314.560.1
Jul 202141.955.22.967.0
Jun 202139.146.314.560.4
May 202145.645.58.966.2

NEW ORDERS

ISM®’s New Orders Index registered 63.2 percent, a decrease of 0.5 percentage point from the July reading of 63.7 percent. New orders grew for the 15th consecutive month after two months of contraction and a preceding period of 128 months of expansion. Comments from respondents include: “Expansion into new markets has provided an uptick in business” and “Increased client demand for new and add-on projects.”

The 13 industries that reported growth of new orders in August — listed in order — are: Information; Accommodation & Food Services; Retail Trade; Educational Services; Construction; Other Services; Mining; Health Care & Social Assistance; Finance & Insurance; Public Administration; Utilities; Transportation & Warehousing; and Professional, Scientific & Technical Services. The three industries reporting a decrease in new orders for the month of August are Arts, Entertainment & Recreation; Real Estate, Rental & Leasing; and Wholesale Trade.

New Orders% Higher% Same% LowerIndex
Aug 202133.652.214.263.2
Jul 202136.259.24.663.7
Jun 202142.043.814.262.1
May 202143.545.211.463.9

EMPLOYMENT

Employment activity in the services sector grew in August for the second consecutive month after contracting in June. ISM®’s Services Employment Index registered 53.7 percent in August, down 0.1 percentage point from the July reading of 53.8 percent. Comments from respondents include: “We are hiring at record levels to staff our restaurants, but turnover is high, and many former employees are still on extended unemployment or not ready to return to work,” and “Increasingly difficult to find qualified candidates to fill open positions.”

The nine industries reporting an increase in employment in August — listed in order — are: Arts, Entertainment & Recreation; Educational Services; Real Estate, Rental & Leasing; Retail Trade; Transportation & Warehousing; Utilities; Wholesale Trade; Construction; and Professional, Scientific & Technical Services. The four industries that reported a reduction in employment in August are: Agriculture, Forestry, Fishing & Hunting; Finance & Insurance; Health Care & Social Assistance; and Information.

Employment% Higher% Same% LowerIndex
Aug 202119.366.813.953.7
Jul 202125.359.615.153.8
Jun 202123.358.917.849.3
May 202127.258.414.455.3

SUPPLIER DELIVERIES

The Supplier Deliveries Index registered 69.6 percent, which is 2.4 percentage points lower than the 72 percent reported in July. A reading above 50 percent indicates slower deliveries, while a reading below 50 percent indicates faster deliveries. Comments from respondents include: “Significant delays caused by late container deliveries,” and “Logistics constraints continue to slow the supply chain.”

The 17 industries reporting slower deliveries in August — listed in order — are: Accommodation & Food Services; Mining; Real Estate, Rental & Leasing; Construction; Management of Companies & Support Services; Agriculture, Forestry, Fishing & Hunting; Other Services; Information; Public Administration; Utilities; Wholesale Trade; Retail Trade; Transportation & Warehousing; Educational Services; Health Care & Social Assistance; Professional, Scientific & Technical Services; and Finance & Insurance. No industries reported faster supplier deliveries in August.

Supplier Deliveries% Slower% Same% FasterIndex
Aug 202141.556.32.269.6
Jul 202145.852.51.772.0
Jun 202139.957.13.068.5
May 202141.957.01.170.4

INVENTORIES

The Inventories Index contracted in August for the third consecutive month. The reading of 46.9 percent was a 2.3-percentage point decrease from the 49.2 percent reported in July. Of the total respondents in August, 38 percent indicated they do not have inventories or do not measure them. Comments from respondents include: “Safety stock is depleted” and “Strong demand is keeping inventory levels low.”

The seven industries reporting an increase in inventories in August — listed in order — are: Arts, Entertainment & Recreation; Accommodation & Food Services; Other Services; Health Care & Social Assistance; Construction; Wholesale Trade; and Utilities. The nine industries reporting a decrease in inventories in August — listed in order — are: Retail Trade; Real Estate, Rental & Leasing; Management of Companies & Support Services; Agriculture, Forestry, Fishing & Hunting; Mining; Information; Transportation & Warehousing; Public Administration; and Professional, Scientific & Technical Services.

Inventories% Higher% Same% LowerIndex
Aug 202114.864.121.146.9
Jul 202122.752.924.449.2
Jun 202126.347.226.549.9
May 202123.955.220.951.5

PRICES

Prices paid by services organizations for materials and services increased in August, with the index registering 75.4 percent, 6.9 percentage points lower than July’s reading of 82.3 percent.

All 18 services industries reported an increase in prices paid during the month of August, listed in order: Retail Trade; Management of Companies & Support Services; Wholesale Trade; Utilities; Construction; Mining; Public Administration; Information; Educational Services; Agriculture, Forestry, Fishing & Hunting; Other Services; Accommodation & Food Services; Professional, Scientific & Technical Services; Transportation & Warehousing; Health Care & Social Assistance; Arts, Entertainment & Recreation; Real Estate, Rental & Leasing; and Finance & Insurance. No industry reported a decrease in prices for the month of August.

Prices% Higher% Same% LowerIndex
Aug 202151.247.61.275.4
Jul 202166.732.50.882.3
Jun 202162.935.91.279.5
May 202165.933.50.580.6
NOTE: Commodities reported as up in price and down in price are listed in the commodities section of this report.

BACKLOG OF ORDERS

The ISM® Services Backlog of Orders Index grew in August for the 14th time in the last 15 months. The index registered 61.3 percent; 2.2 percentage points lower than the 63.5 percent reported in July. Of the total respondents in August, 39 percent indicated they do not measure backlog of orders.

The 12 industries reporting an increase in order backlogs in August — listed in order — are: Other Services; Transportation & Warehousing; Retail Trade; Public Administration; Information; Educational Services; Wholesale Trade; Accommodation & Food Services; Health Care & Social Assistance; Utilities; Construction; and Professional, Scientific & Technical Services. The three industries that reported a decrease in backlogs in August are Arts, Entertainment & Recreation; Management of Companies & Support Services; and Mining.

Backlog of Orders% Higher% Same% LowerIndex
Aug 202135.451.812.861.3
Jul 202132.861.35.963.5
Jun 202135.460.73.965.8
May 202132.158.19.861.1

NEW EXPORT ORDERS

Orders and requests for services and other non-manufacturing activities to be provided outside of the U.S. by domestically based companies grew in August for the seventh consecutive month. The New Export Orders Index registered 60.6 percent in August, 5.2 percentage points lower than the 65.8 percent reported in July. Of the total respondents in August, 71 percent indicated they either do not perform, or do not separately measure, orders for work outside of the U.S.

The 10 industries reporting an increase in new export orders in August — listed in order — are: Accommodation & Food Services; Information; Real Estate, Rental & Leasing; Utilities; Construction; Finance & Insurance; Retail Trade; Wholesale Trade; Professional, Scientific & Technical Services; and Transportation & Warehousing. No industry reported a decrease in exports in August; eight industries reported no change.

New Export Orders% Higher% Same% LowerIndex
Aug 202122.875.61.660.6
Jul 202133.365.01.765.8
Jun 202113.773.912.450.7
May 202125.070.05.060.0

IMPORTS

The Imports Index contracted in August, as it registered 48.7 percent, 2.9 percentage points lower than July’s figure of 51.6 percent. Sixty-six percent of respondents reported that they do not use, or do not track the use of, imported materials.

The four industries reporting an increase in imports for the month of August are: Transportation & Warehousing; Real Estate, Rental & Leasing; Wholesale Trade; and Construction. The eight industries reporting a decrease in imports in August — listed in order — are: Agriculture, Forestry, Fishing & Hunting; Accommodation & Food Services; Management of Companies & Support Services; Finance & Insurance; Retail Trade; Health Care & Social Assistance; Information; and Professional, Scientific & Technical Services. Six industries reported no change in imports in August.

Imports% Higher% Same% LowerIndex
Aug 20219.478.711.948.7
Jul 20218.286.94.951.6
Jun 202121.274.04.858.2
May 202115.470.014.650.4

INVENTORY SENTIMENT

The ISM® Services Inventory Sentiment Index contracted in August for the fifth consecutive month, registering 41.4 percent, 1.1 percentage points higher than July’s figure of 40.3 percent. This indicates that respondents feel their inventories are too low when correlated to business activity levels.

The seven industries reporting sentiment that their inventories were too high in August — listed in order — are: Arts, Entertainment & Recreation; Finance & Insurance; Accommodation & Food Services; Mining; Utilities; Information; and Health Care & Social Assistance. The nine industries reporting a feeling that their inventories were too low in August — listed in order — are: Real Estate, Rental & Leasing; Agriculture, Forestry, Fishing & Hunting; Retail Trade; Professional, Scientific & Technical Services; Management of Companies & Support Services; Transportation & Warehousing; Educational Services; Wholesale Trade; and Public Administration.

Inventory Sentiment% Too High% About Right% Too LowIndex
Aug 202112.557.829.741.4
Jul 20219.561.628.940.3
Jun 20218.657.234.237.2
May 202113.055.032.040.5

ABOUT THIS REPORT

DO NOT CONFUSE THIS NATIONAL REPORT with the various regional purchasing reports released across the country. The national report’s information reflects the entire U.S., while the regional reports contain primarily regional data from their local vicinities. Also, the information in the regional reports is not used in calculating the results of the national report. The information compiled in this report is for the month of August 2021.

The data presented herein is obtained from a survey of supply executives in the services sector based on information they have collected within their respective organizations. ISM® makes no representation, other than that stated within this release, regarding the individual company data collection procedures. The data should be compared to all other economic data sources when used in decision-making.

DATA AND METHOD OF PRESENTATION

The Services ISM® Report On Business® (formerly the Non-Manufacturing ISM® Report On Business®) is based on data compiled from purchasing and supply executives nationwide. Membership of the Services Business Survey Committee (formerly Non-Manufacturing Business Survey Committee) is diversified by NAICS, based on each industry’s contribution to gross domestic product (GDP). The Services Business Survey Committee responses are divided into the following NAICS code categories: Agriculture, Forestry, Fishing & Hunting; Mining; Utilities; Construction; Wholesale Trade; Retail Trade; Transportation & Warehousing; Information; Finance & Insurance; Real Estate, Rental & Leasing; Professional, Scientific & Technical Services; Management of Companies & Support Services; Educational Services; Health Care & Social Assistance; Arts, Entertainment & Recreation; Accommodation & Food Services; Public Administration; and Other Services (services such as Equipment & Machinery Repairing; Promoting or Administering Religious Activities; Grantmaking; Advocacy; and Providing Dry-Cleaning & Laundry Services, Personal Care Services, Death Care Services, Pet Care Services, Photofinishing Services, Temporary Parking Services, and Dating Services).

Survey responses reflect the change, if any, in the current month compared to the previous month. For each of the indicators measured (Business Activity, New Orders, Backlog of Orders, New Export Orders, Inventory Change, Inventory Sentiment, Imports, Prices, Employment and Supplier Deliveries), this report shows the percentage reporting each response and the diffusion index. Responses represent raw data and are never changed. Data is seasonally adjusted for Business Activity, New Orders, Prices and Employment. All seasonal adjustment factors are subject annually to relatively minor changes when conditions warrant them. The remaining indexes have not indicated significant seasonality.

The Services PMI® is a composite index based on the diffusion indexes for four of the indicators with equal weights: Business Activity (seasonally adjusted), New Orders (seasonally adjusted), Employment (seasonally adjusted) and Supplier Deliveries. Diffusion indexes have the properties of leading indicators and are convenient summary measures showing the prevailing direction of change and the scope of change. An index reading above 50 percent indicates that the services economy is generally expanding; below 50 percent indicates that it is generally declining. Supplier Deliveries is an exception. A Supplier Deliveries Index above 50 percent indicates slower deliveries and below 50 percent indicates faster deliveries.

A Services PMI® above 49.2 percent, over time, indicates that the overall economy, or gross domestic product (GDP), is generally expanding; below 49.2 percent, it is generally declining. The distance from 50 percent or 49.2 percent is indicative of the strength of the expansion or decline.

The Services ISM® Report On Business® survey is sent out to Services Business Survey Committee respondents the first part of each month. Respondents are asked to ONLY report on U.S. operations for the current month. ISM® receives survey responses throughout most of any given month, with the majority of respondents generally waiting until late in the month to submit responses to give the most accurate picture of current business activity. ISM® then compiles the report for release on the third business day of the following month.

The industries reporting growth, as indicated in the Services ISM® Report On Business® monthly report, are listed in the order of most growth to least growth. For the industries reporting contraction or decreases, those are listed in the order of the highest level of contraction/decrease to the least level of contraction/decrease.

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