Services (NMI) July 2021 Report

Economic activity in the services sector grew in July for the 14th 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 another all-time high of 64.1 percent, which is 4 percentage points higher than the June reading of 60.1 and eclipses the previous record of 64 percent in May 2021. The July reading indicates the 14th straight month of growth for the services sector, which has expanded for all but two of the last 138 months.

“The Supplier Deliveries Index registered 72 percent, up 3.5 percentage points from June’s reading of 68.5 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 82.3 percent, up 2.8 percentage points from the June figure of 79.5 percent and its second-highest reading ever, behind September 2005 (83.5 percent).

“According to the Services PMI®, 17 services industries reported growth. The composite index indicated growth for the 14th consecutive month after a two-month contraction in April and May 2020. The rate of expansion in the services sector recorded another all-time high. The Employment Index reflected growth, even though the constrained labor pool continues to be an issue. Materials shortages, inflation and logistics continue to negatively impact the continuity of supply,” says Nieves.

INDUSTRY PERFORMANCE

The 17 services industries reporting growth in July — listed in order — are: Arts, Entertainment & Recreation; Wholesale Trade; Accommodation & Food Services; Management of Companies & Support Services; Retail Trade; Real Estate, Rental & Leasing; Transportation & Warehousing; Information; Other Services; Public Administration; Construction; Health Care & Social Assistance; Utilities; Professional, Scientific & Technical Services; Educational Services; Finance & Insurance; and Mining. No industry reported a decrease in July.

WHAT RESPONDENTS ARE SAYING

  • “Peak demand while still facing challenges filling open positions.” [Accommodation & Food Services]
  • “The slow movement of container traffic has definitely impacted our business in the first half of the year. We expect the situation will take another year to correct itself.” [Agriculture, Forestry, Fishing & Hunting]
  • “Costs have risen dramatically in the last 45 days. Lodging, fuel, travel and supplies are all rising sharply. Costs for available labor are also rising, as demand increases in a diminished labor pool.” [Construction]
  • “Surgical volumes continue to increase, reflecting pent-up demand for services. However, the COVID-19 delta variant is impeding our ability to manage increased surgical volumes due to increased COVID-19 case admissions. Consistency of supply in a couple of categories (coagulation tubes and nitrile gloves) remains challenging, though moderately manageable.” [Health Care & Social Assistance]
  • “Fuel prices are coming back down a bit. Labor shortage continues for drivers and general labor work. We have increased pay for many positions, but the shortage continues.” [Management of Companies & Support Services]
  • “Supply chain disruptions continue to impact sales.” [Professional, Scientific & Technical Services]
  • “Appliances, laptops and certain chemicals are still in short supply.” [Public Administration]
  • “Business continues to gain speed as the economy recovers and assuming there won’t be additional government-mandated lockdowns.” [Real Estate, Rental & Leasing]
  • “Ocean freight costs have created a negative impact to our business. The congestions at (the ports of) Long Beach/Los Angeles and Seattle have increased lead time by 15 days. Additional delays are occurring at the Chicago rail yard, (causing) two to three weeks of additional lead time.” [Wholesale Trade]

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

 Services PMI®Manufacturing PMI®
IndexSeries Index JulSeries Index JunPercent Point ChangeDirectionRate of ChangeTrend** (Months)Series Index JulSeries Index JunPercent Point Change
Services PMI®64.160.1+4.0GrowingFaster1459.560.6-1.1
Business Activity/ Production67.060.4+6.6GrowingFaster1458.460.8-2.4
New Orders63.762.1+1.6GrowingFaster1464.966.0-1.1
Employment53.849.3+4.5GrowingFrom Contracting152.949.9+3.0
Supplier Deliveries72.068.5+3.5SlowingFaster2672.575.1-2.6
Inventories49.249.9-0.7ContractingFaster248.951.1-2.2
Prices82.379.5+2.8IncreasingFaster5085.792.1-6.4
Backlog of Orders63.565.8-2.3GrowingSlower765.064.5+0.5
New Export Orders65.850.7+15.1GrowingFaster655.756.2-0.5
Imports51.658.2-6.6GrowingSlower1053.761.0-7.3
Inventory Sentiment40.337.2+3.1Too LowSlower4N/AN/AN/A
Customers’ InventoriesN/AN/AN/AN/AN/AN/A25.030.8-5.8
Overall EconomyGrowingFaster14
Services SectorGrowingFaster14

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; Chicken (3); Construction Contractors; Construction Subcontractors; Copper Products; Corrugated Boxes; Diesel (8); Electrical Components (6); Electronic Components; Engineered Wood Products (2); Fiber-Optic Cable; Freight (3); Fuel* (7); Gasoline (8); Labor (8); Labor — Temporary (7); Lobster Tails (2); Lumber* (7); Metal Products (3); Oriented Strand Board (OSB) (8); Packaging Materials (3); Plumbing Products; Polyvinyl Chloride (PVC) Products (11); Resin-Based Products; Steel (11); Steel Products (7); Transportation Rates; Welding Products; and Wood — Pallets (2).

Commodities Down in Price


Fuel*; Lumber*; and Personal Protective Equipment (PPE) (2).

Commodities in Short Supply


Chemicals; Circuit Breakers; Construction Contractors; Electrical Components (4); Electronic Components (4); Engineered Wood Products; Fiber-Optic Cable; Gloves (8); Labor — Temporary (7); Nitrile Gloves (14); Pipette (5); Plastic Products (2); Polyvinyl Chloride (PVC) Products (6); Semiconductors; Sterile Surgical Wraps; Vehicles (3); Wood — Pallets; and Wood Products.

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.


JULY 2021 SERVICES INDEX SUMMARIES

SERVICES PMI®


In July, the Services PMI® registered 64.1 percent, a 4-percentage point increase compared to the June figure of 60.1 percent. This is the highest reading since the inception of the Services PMI® in 2008. This reading indicates the services sector grew for the 14th 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 July Services PMI® indicates expansion for a 14th 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 July (64.1 percent) corresponds to a 5.2-percent increase in real gross domestic product (GDP) on an annualized basis.”

SERVICES PMI® HISTORY

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

Average for 12 months – 59.5
High – 64.1
Low – 55.3


BUSINESS ACTIVITY

ISM®’s Business Activity Index registered 67 percent in July, an increase of 6.6 percentage points from the June reading of 60.4 percent. This represents growth for the 14th consecutive month. Comments from respondents include: “Pent-up demand driving transactions” and “Increased business as companies begin to fully reopen and remote workers return to offices.”

The 17 industries reporting an increase in business activity for the month of July — listed in order — are: Arts, Entertainment & Recreation; Management of Companies & Support Services; Wholesale Trade; Retail Trade; Real Estate, Rental & Leasing; Accommodation & Food Services; Information; Health Care & Social Assistance; Transportation & Warehousing; Public Administration; Utilities; Other Services; Construction; Professional, Scientific & Technical Services; Finance & Insurance; Educational Services; and Mining. No industry reported a decrease in July.

Business Activity% Higher% Same% LowerIndex
Jul 202141.955.22.967.0
Jun 202139.146.314.560.4
May 202145.645.58.966.2
Apr 202146.048.35.762.7

NEW ORDERS

ISM®’s New Orders Index registered 63.7 percent, an increase of 1.6 percentage points from the June reading of 62.1 percent. New orders grew for the 14th consecutive month after two months of contraction and a preceding period of 128 months of expansion. Comments from respondents include: “More companies are opening for business as usual after the pandemic” and “Customer demand continues to increase.”

The 16 industries that reported growth of new orders in July — listed in order — are: Arts, Entertainment & Recreation; Wholesale Trade; Management of Companies & Support Services; Real Estate, Rental & Leasing; Other Services; Public Administration; Accommodation & Food Services; Health Care & Social Assistance; Utilities; Retail Trade; Transportation & Warehousing; Finance & Insurance; Educational Services; Information; Professional, Scientific & Technical Services; and Construction. The only industry reporting a decrease in new orders for the month of July is Mining.

New Orders% Higher% Same% LowerIndex
Jul 202136.259.24.663.7
Jun 202142.043.814.262.1
May 202143.545.211.463.9
Apr 202145.148.96.063.2

EMPLOYMENT

Employment activity in the services sector grew in July after a month of contraction. ISM®’s Services Employment Index registered 53.8 percent in July, up 4.5 percentage points from the June reading of 49.3 percent. Comments from respondents include: “Trying to aggressively fill positions. (However, it is) very difficult to get positions filled. (We are) still using agency clinical staffing. Looks like people don’t want to work in the lower support service areas.” Also: “Demand is up, and it is hard to find employees.”

The 13 industries reporting an increase in employment in July — listed in order — are: Arts, Entertainment & Recreation; Accommodation & Food Services; Mining; Information; Retail Trade; Transportation & Warehousing; Wholesale Trade; Construction; Management of Companies & Support Services; Public Administration; Utilities; Professional, Scientific & Technical Services; and Finance & Insurance. The three industries that reported a reduction in employment in July are: Real Estate, Rental & Leasing; Educational Services; and Health Care & Social Assistance.

Employment% Higher% Same% LowerIndex
Jul 202125.359.615.153.8
Jun 202123.358.917.849.3
May 202127.258.414.455.3
Apr 202126.764.48.958.8

SUPPLIER DELIVERIES

The Supplier Deliveries Index registered 72 percent, which is 3.5 percentage points higher than the 68.5 percent reported in June. A reading above 50 percent indicates slower deliveries, while a reading below 50 percent indicates faster deliveries. Comments from respondents include: “Huge importation delays from Asia and U.S. ports and rails. The main bottleneck is due to the big ocean vessels’ limited capacity and container availability, equipment in U.S. ports (and) truck-driver shortages.” Also: “Shortage of logistics capacity.”

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

Supplier Deliveries% Slower% Same% FasterIndex
Jul 202145.852.51.772.0
Jun 202139.957.13.068.5
May 202141.957.01.170.4
Apr 202136.459.64.166.1

INVENTORIES

The Inventories Index contracted in July for the second consecutive month. The reading of 49.2 percent was a 0.7-percentage point decrease from the 49.9 percent reported in June. Of the total respondents in July, 39 percent indicated they do not have inventories or do not measure them. Comments from respondents include: “Distributors still operating on a lean model, and shipping delays around the world right now are causing many stockouts” and “Not enough stock on hand; shortages all across the board due to increase in usage and extended lead times.”

The 10 industries reporting an increase in inventories in July — listed in order — are: Arts, Entertainment & Recreation; Agriculture, Forestry, Fishing & Hunting; Other Services; Finance & Insurance; Accommodation & Food Services; Retail Trade; Utilities; Wholesale Trade; Information; and Professional, Scientific & Technical Services. The five industries reporting a decrease in inventories in July are: Real Estate, Rental & Leasing; Transportation & Warehousing; Mining; Educational Services; and Health Care & Social Assistance.

Inventories% Higher% Same% LowerIndex
Jul 202122.752.924.449.2
Jun 202126.347.226.549.9
May 202123.955.220.951.5
Apr 202120.158.121.849.1

PRICES

Prices paid by service organizations for materials and services increased in July, with the index registering 82.3 percent, 2.8 percentage points higher than June’s reading of 79.5 percent. This is the third month the Prices Index has surpassed 80 percent — the other two are September 2005 (83.5 percent) and May 2021 (80.6 percent) — since data collection for the Services ISM® Report On Business® began in 1997.

The 17 services industries that reported an increase in prices paid during the month of July — listed in order — are: Arts, Entertainment & Recreation; Real Estate, Rental & Leasing; Mining; Retail Trade; Wholesale Trade; Utilities; Construction; Transportation & Warehousing; Finance & Insurance; Other Services; Accommodation & Food Services; Management of Companies & Support Services; Public Administration; Educational Services; Information; Health Care & Social Assistance; and Professional, Scientific & Technical Services. No industry reported a decrease in prices for the month of July.

Prices% Higher% Same% LowerIndex
Jul 202166.732.50.882.3
Jun 202162.935.91.279.5
May 202165.933.50.580.6
Apr 202158.440.41.276.8
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 July for the 13th time in the last 14 months. The index registered 63.5 percent; 2.3 percentage points lower than the 65.8 percent reported in June. Of the total respondents in July, 37 percent indicated they do not measure backlog of orders.

The 13 industries reporting an increase in order backlogs in July — listed in order — are: Retail Trade; Accommodation & Food Services; Transportation & Warehousing; Real Estate, Rental & Leasing; Management of Companies & Support Services; Health Care & Social Assistance; Wholesale Trade; Construction; Information; Other Services; Utilities; Public Administration; and Professional, Scientific & Technical Services. The three industries that reported a decrease in backlogs in July are: Agriculture, Forestry, Fishing & Hunting; Educational Services; and Mining.

Backlog of Orders% Higher% Same% LowerIndex
Jul 202132.861.35.963.5
Jun 202135.460.73.965.8
May 202132.158.19.861.1
Apr 202121.967.710.455.7

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 July for the sixth consecutive month. The New Export Orders Index registered 65.8 percent in July, 15.1 percentage points higher than the 50.7 percent reported in June and its second-highest reading ever, behind May 2007 (66 percent). This is the index’s second-largest single-month increase; a 17.4-percentage point gain occurred between May and June 2020. Of the total respondents in July, 70 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 July — listed in order — are: Real Estate, Rental & Leasing; Accommodation & Food Services; Retail Trade; Construction; Educational Services; Wholesale Trade; Professional, Scientific & Technical Services; Transportation & Warehousing; Information; and Finance & Insurance. The only industry reporting a decrease in exports in July is Public Administration. Seven industries reported no change in July.

New Export Orders% Higher% Same% LowerIndex
Jul 202133.365.01.765.8
Jun 202113.773.912.450.7
May 202125.070.05.060.0
Apr 202119.578.32.258.6

IMPORTS

The Imports Index grew at a slower rate in July, as it registered 51.6 percent, 6.6 percentage points lower than June’s figure of 58.2 percent. Seventy-six percent of respondents reported that they do not use, or do not track the use of, imported materials.

The five industries reporting an increase in imports for the month of July are: Educational Services; Wholesale Trade; Finance & Insurance; Utilities; and Professional, Scientific & Technical Services. The two industries reporting a decrease in imports in July are: Accommodation & Food Services; and Health Care & Social Assistance. Eleven industries reported no change in imports in July.

Imports% Higher% Same% LowerIndex
Jul 20218.286.94.951.6
Jun 202121.274.04.858.2
May 202115.470.014.650.4
Apr 202116.977.45.655.7

INVENTORY SENTIMENT

The ISM® Services Inventory Sentiment Index contracted in July for the fourth consecutive month, registering 40.3 percent, which is 3.1 percentage points higher than June’s figure of 37.2 percent. This indicates that respondents feel that inventories are too low when correlated to their level of business.

The five industries reporting sentiment that their inventories were too high in July are: Arts, Entertainment & Recreation; Mining; Other Services; Utilities; and Health Care & Social Assistance. The 10 industries reporting a feeling that their inventories were too low in July — listed in order — are: Accommodation & Food Services; Management of Companies & Support Services; Retail Trade; Real Estate, Rental & Leasing; Professional, Scientific & Technical Services; Transportation & Warehousing; Wholesale Trade; Construction; Public Administration; and Information.

Inventory Sentiment% Too High% About Right% Too LowIndex
Jul 20219.561.628.940.3
Jun 20218.657.234.237.2
May 202113.055.032.040.5
Apr 20219.774.216.146.8

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 July 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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