The Institute for Supply Management (ISM) released its March Services Purchasing Managers' Index (PMI), with the headline composite index at 51.6—above the forecast of 50.2. This marks the tenth consecutive month of expansion for the index.
Here is an excerpt from the report summary:
Miller continues, “April’s change in indexes was a reversal of March’s direction, with increases in three (New Orders, Employment and Supplier Deliveries) of the four subindexes that directly factor into the Services PMI®. Of those four, only the Business Activity Index had a lower reading compared to March. Employment continues to be the only one of these subindexes in contraction territory, with two straight months of contraction. From December through February, all four subindexes were in expansion. Regarding tariffs, respondents cited actual pricing impacts as concerns, more so than uncertainty and future pressures. Respondents continue to mention federal agency budget cuts as a drag on business, but overall, results are improving.”
Here is a table showing the PMI's components.
Unlike its much older kin, the ISM manufacturing series, there is relatively little history for ISM's non-manufacturing data, especially for the headline composite Index, which dates from 2008. The chart below shows the non-manufacturing composite.
The more interesting and useful sub-component is the non-manufacturing business activity Index. The latest data point for April is 53.7, down from the previous month and the lowest level since August.
For a diffusion index, this can be an extremely volatile indicator, hence the addition of a six-month moving average to help us visualize the short-term trends.
Theoretically, this indicator should become more useful as the time frame of its coverage expands. Manufacturing may be a more sensitive barometer than non-manufacturing activity, but we are increasingly a services-oriented economy, which explains our intention to keep this series on the radar.
ISM PMI Comparison: Manufacturing vs. Services
The next chart offers a comparison between the two Purchasing Managers' Indexes provided by the Institute for Supply Management. See the latest update on the Manufacturing PMI here.
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