Services (NMI) June 2021 Report

Economic activity in the services sector grew in June for the 13th 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 60.1 percent, which is 3.9 percentage points lower than May’s all-time high reading of 64 percent. The June reading indicates the 13th straight month of growth for the services sector, which has expanded for all but two of the last 137 months.

“The Supplier Deliveries Index registered 68.5 percent, down 1.9 percentage points from May’s reading of 70.4 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 79.5 percent, 1.1 percentage points lower than the May reading of 80.6 percent, indicating that prices increased in June, and at a slightly slower rate.

“According to the Services PMI®, 16 services industries reported growth. The composite index indicated growth for the 13th consecutive month after a two-month contraction in April and May 2020. The rate of expansion in the services sector remains strong, despite the slight pullback in the rate of growth from the previous month’s all-time high. Challenges with materials shortages, inflation, logistics and employment resources continue to be an impediment to business conditions,” says Nieves.

INDUSTRY PERFORMANCE

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

WHAT RESPONDENTS ARE SAYING

  • “Our restaurants are quickly — maybe too quickly — returning to 2019 sales levels. Strong consumer demand for dining out is clearly evident as COVID-19 restrictions ease, but the challenges are supply chain outages, logistics delays and employee- and management-staffing constraints. Some locations cannot open for business or (have) limited hours, as we cannot staff the restaurant to meet consumer demand.” [Accommodation & Food Services]
  • “Severe supply chain disruptions and inflation are continuing in the marketplace, in all sectors.” [Arts, Entertainment & Recreation]
  • “COVID-19 continues to cause troubles for all of our deliveries, as well as short supply a lot of materials. (Shortages of) lumber, copper, and steel continue, which is driving up pricing and lead times.” [Construction]
  • “The declining positive test rates for COVID-19 is already having a significant impact, as virtually all aspects of our operations are picking up rapidly. The summer is normally the slow period, as limited teaching is taking place, but this year, preparations for the fall semester are already underway.” [Educational Services]
  • “New business is actively trending up locally, nationally and internationally.” [Finance & Insurance]
  • “We continue to see a high (patient) census as COVID-19 restrictions are eased, but the volumes are not pandemic related. There are more patients now because they wouldn’t or couldn’t get treatment because of restrictions on (non-COVID-19) care or personal cautiousness.” [Health Care & Social Assistance]
  • “Employees globally are returning to the office where possible. We expect to have most employees in the office starting in September.” [Information]
  • “Business conditions continue to rebound; however, like everywhere, the challenges in the supply chain are numerous. We continue to see cost increases, delayed shipments, pushed-out lead times, and no clarity as to when predictive balance returns to this market.” [Retail Trade]
  • “Labor market remains tight, and wages have risen at an unprecedented rate. We are expecting a long-term effect on pricing of services.” [Transportation & Warehousing]
  • “Overall business activity in the month has been strong. We are seeing increased orders and slight improvements in backlogs. The primary headwinds this month continue to be very expensive ocean freight rates, increasing business costs and increasing raw-materials costs. The top line is not outrunning expenses.” [Wholesale Trade]
  • “Starting to see a lot of commodity-price increases for chemicals, acidizing and cementing. This is driven by product cost increases stemming from low production from plants.” [Mining]

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

 Services PMI®Manufacturing PMI®
IndexSeries Index JunSeries Index MayPercent Point ChangeDirectionRate of ChangeTrend** (Months)Series Index JunSeries Index MayPercent Point Change
Services PMI®60.164.0-3.9GrowingSlower1360.661.2-0.6
Business Activity/ Production60.466.2-5.8GrowingSlower1360.858.5+2.3
New Orders62.163.9-1.8GrowingSlower1366.067.0-1.0
Employment49.355.3-6.0ContractingFrom Growing149.950.9-1.0
Supplier Deliveries68.570.4-1.9SlowingSlower2575.178.8-3.7
Inventories49.951.5-1.6ContractingFrom Growing151.150.8+0.3
Prices79.580.6-1.1IncreasingSlower4992.188.0+4.1
Backlog of Orders65.861.1+4.7GrowingFaster664.570.6-6.1
New Export Orders50.760.0-9.3GrowingSlower556.255.4+0.8
Imports58.250.4+7.8GrowingFaster961.054.0+7.0
Inventory Sentiment37.240.5-3.3Too LowFaster3N/AN/AN/A
Customers’ InventoriesN/AN/AN/AN/AN/AN/A30.828.0+2.8
Overall EconomyGrowingSlower13
Services SectorGrowingSlower13

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


Beef (2); Chicken (2); Construction Materials (4); Copper Wire (3); Diesel (7); Electrical Components (5); Engineered Wood Products; Food (2); Freight (2); Fuel (6); Gasoline (7); Insulation; Labor (7); Labor —Temporary (6); Lobster Tails; Lodging; Lumber (6); Metal Products (2); Natural Gas; Oriented Strand Board (OSB) (7); Packaging Materials (2); Pallets (2); Paper; Personal Protective Equipment (PPE)*; Plastic; Plastic Products (2); Polyvinyl Chloride (PVC) Products (10); Pork Products; Poultry; Stainless Steel Products; Steel (10); Steel Products (6); Tires; and Wood Pallets.

Commodities Down in Price


Exam Gloves; Gloves; Masks; Nitrile Gloves; and Personal Protective Equipment (PPE)*.

Commodities in Short Supply


Chicken (2); Chlorine; Computer Hardware (2); Electrical Components (3); Electronic Components (3); Gloves (7); Labor (2); Labor — Contingent; Labor — Temporary (6); Lumber (3); Lumber Products (2); Needles and Syringes (7); Nitrile Gloves (13); Pipette (4); Plastic Products; Polyvinyl Chloride (PVC); Polyvinyl Chloride (PVC) Products (5); Resin-Based Products (2); Steel Products (7); Vehicles (2); and Wood.

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.


JUNE 2021 SERVICES INDEX SUMMARIES

SERVICES PMI®


In June, the Services PMI® registered 60.1 percent, a 3.9-percentage point decrease compared to the May figure of 64 percent. This reading indicates the services sector grew for the 13th 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 June Services PMI® indicates expansion for a 13th 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 June (60.1 percent) corresponds to a 3.8-percent increase in real gross domestic product (GDP) on an annualized basis.”

SERVICES PMI® HISTORY

MonthServices PMI®
Jun 202160.1
May 202164.0
Apr 202162.7
Mar 202163.7
Feb 202155.3
Jan 202158.7
MonthServices PMI®
Dec 202057.7
Nov 202056.8
Oct 202056.2
Sep 202057.2
Aug 202057.2
Jul 202056.6

Average for 12 months – 58.9
High – 64.0
Low – 55.3


BUSINESS ACTIVITY

ISM®’s Business Activity Index registered 60.4 percent in June, a decrease of 5.8 percentage points from the May reading of 66.2 percent. This represents growth for the 13th consecutive month. Comments from respondents include: “Increase in available restaurant capacity for in-location dining” and “Customers are ramping up their capital expenditures and awarding projects.”

The 16 industries reporting an increase in business activity for the month of June — listed in order — are: Arts, Entertainment & Recreation; Other Services; Management of Companies & Support Services; Utilities; Wholesale Trade; Transportation & Warehousing; Information; Retail Trade; Construction; Public Administration; Health Care & Social Assistance; Finance & Insurance; Accommodation & Food Services; Mining; Educational Services; and Professional, Scientific & Technical Services. The two industries reporting a decrease in business activity in June are Real Estate, Rental & Leasing; and Agriculture, Forestry, Fishing & Hunting.

Business Activity% Higher% Same% LowerIndex
Jun 202139.146.314.560.4
May 202145.645.58.966.2
Apr 202146.048.35.762.7
Mar 202141.950.27.969.4

NEW ORDERS

ISM®’s New Orders Index registered 62.1 percent, a decrease of 1.8 percentage points from the May reading of 63.9 percent. New orders grew for the 13th consecutive month after two months of contraction and a preceding period of 128 months of expansion. Comments from respondents include: “More traffic at our locations, resulting in more service” and “Elective surgeries continuing to grow and fill the schedule.”

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

New Orders% Higher% Same% LowerIndex
Jun 202142.043.814.262.1
May 202143.545.211.463.9
Apr 202145.148.96.063.2
Mar 202139.549.910.667.2

EMPLOYMENT

Employment activity in the services sector contracted in June after five consecutive months of growth. ISM®’s Services Employment Index registered 49.3 percent in June, down 6 percentage points from the May reading of 55.3 percent. Comments from respondents include: “Increasingly difficult to find qualified candidates to fill open positions” and “Employees have been somewhat slow to return to work, and there has been turnover as some pursue new opportunities in a hot job market.”

The 12 industries reporting an increase in employment in June — listed in order — are: Arts, Entertainment & Recreation; Retail Trade; Transportation & Warehousing; Other Services; Utilities; Finance & Insurance; Mining; Public Administration; Wholesale Trade; Health Care & Social Assistance; Professional, Scientific & Technical Services; and Construction. The two industries that reported a reduction in employment in June are Real Estate, Rental & Leasing; and Educational Services.

Employment% Higher% Same% LowerIndex
Jun 202123.358.917.849.3
May 202127.258.414.455.3
Apr 202126.764.48.958.8
Mar 202122.666.311.157.2

SUPPLIER DELIVERIES

The Supplier Deliveries Index registered 68.5 percent, which is 1.9 percentage points lower than the 70.4 percent reported in May. A reading above 50 percent indicates slower deliveries, while a reading below 50 percent indicates faster deliveries. Comments from respondents include: “Transportation shortages (and a) lack of drivers have slowed deliveries” and “Port congestion continues to delay product deliveries.”

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

Supplier Deliveries% Slower% Same% FasterIndex
Jun 202139.957.13.068.5
May 202141.957.01.170.4
Apr 202136.459.64.166.1
Mar 202129.363.57.261.0

INVENTORIES

The Inventories Index contracted in June after growing in May. The reading of 49.9 percent was a 1.6-percentage point decrease from the 51.5 percent reported in May. Of the total respondents in June, 35 percent indicated they do not have inventories or do not measure them. Comments from respondents include: “Inventories are low due to supplier and logistics delays” and “Utilizing current inventories due to slower replacements.”

The five industries reporting an increase in inventories in June are: Arts, Entertainment & Recreation; Wholesale Trade; Utilities; Transportation & Warehousing; and Professional, Scientific & Technical Services. The four industries reporting a decrease in inventories in June are: Management of Companies & Support Services; Public Administration; Health Care & Social Assistance; and Construction. Nine industries reported no change in inventories.

Inventories% Higher% Same% LowerIndex
Jun 202126.347.226.549.9
May 202123.955.220.951.5
Apr 202120.158.121.849.1
Mar 202132.642.824.554.0

PRICES

Prices paid by service organizations for materials and services increased in June, with the index registering 79.5 percent, 1.1 percentage points lower than May’s reading of 80.6 percent.

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

Prices% Higher% Same% LowerIndex
Jun 202162.935.91.279.5
May 202165.933.50.580.6
Apr 202158.440.41.276.8
Mar 202152.047.01.074.0
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 June for the 12th time in the last 13 months. The index registered 65.8 percent, 4.7 percentage points higher than the 61.1 percent reported in May. Of the total respondents in June, 37 percent indicated they do not measure backlog of orders.

The 14 industries reporting an increase in order backlogs in June — listed in order — are: Accommodation & Food Services; Transportation & Warehousing; Other Services; Retail Trade; Real Estate, Rental & Leasing; Wholesale Trade; Finance & Insurance; Management of Companies & Support Services; Health Care & Social Assistance; Public Administration; Utilities; Information; Professional, Scientific & Technical Services; and Educational Services. The four industries that reported a decrease in backlogs in June are Arts, Entertainment & Recreation; Agriculture, Forestry, Fishing & Hunting; Mining; and Construction.

Backlog of Orders% Higher% Same% LowerIndex
Jun 202135.460.73.965.8
May 202132.158.19.861.1
Apr 202121.967.710.455.7
Mar 202116.667.316.150.2

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 June for the fifth consecutive month. The New Export Orders Index registered 50.7 percent in June, 9.3 percentage points lower than the 60 percent reported in May. Of the total respondents in June, 73 percent indicated they either do not perform, or do not separately measure, orders for work outside of the U.S.

The six industries reporting an increase in new export orders in June — listed in order — are: Construction; Wholesale Trade; Retail Trade; Finance & Insurance; Information; and Professional, Scientific & Technical Services. The four industries reporting a decrease in exports in June are Real Estate, Rental & Leasing; Management of Companies & Support Services; Other Services; and Accommodation & Food Services. Eight industries reported no change in June.

New Export Orders% Higher% Same% LowerIndex
Jun 202113.773.912.450.7
May 202125.070.05.060.0
Apr 202119.578.32.258.6
Mar 202117.975.07.055.5

IMPORTS

The Imports Index grew at a faster rate in June, as it registered 58.2 percent, 7.8 percentage points higher than May’s figure of 50.4 percent. Sixty-six percent of respondents reported that they do not use, or do not track the use of, imported materials.

The seven industries reporting an increase in imports for the month of June — listed in order — are: Retail Trade; Other Services; Real Estate, Rental & Leasing; Agriculture, Forestry, Fishing & Hunting; Educational Services; Wholesale Trade; and Information. The two industries reporting a decrease in imports in June are Accommodation & Food Services; and Professional, Scientific & Technical Services. Nine industries reported no change.

Imports% Higher% Same% LowerIndex
Jun 202121.274.04.858.2
May 202115.470.014.650.4
Apr 202116.977.45.655.7
Mar 202110.181.18.750.7

INVENTORY SENTIMENT

The ISM® Services Inventory Sentiment Index contracted in June for the third consecutive month, registering 37.2 percent, which is 3.3 percentage points lower than May’s figure of 40.5 percent. This indicates that respondents feel that inventories are too low when correlated to their level of business.

The four industries reporting sentiment that their inventories were too high in June are Finance & Insurance; Utilities; Health Care & Social Assistance; and Construction. The eight industries reporting a feeling that their inventories were too low in June — listed in order — are: Real Estate, Rental & Leasing; Accommodation & Food Services; Public Administration; Wholesale Trade; Agriculture, Forestry, Fishing & Hunting; Professional, Scientific & Technical Services; Transportation & Warehousing; and Retail Trade. Six industries reported no change in inventory sentiment.

Inventory Sentiment% Too High% About Right% Too LowIndex
Jun 20218.657.234.237.2
May 202113.055.032.040.5
Apr 20219.774.216.146.8
Mar 202116.871.711.552.7

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 June 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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