Weekly Macro Update: US Services
Last week’s newsletter covered the ISM Manufacturing index. This week’s newsletter focuses on ISM Services. To understand the figures, an index number above 50 suggests growth in the services sector of the economy, and a number below 50 suggests contraction. Here are the highlights for November:
The sector expanded for the seventh consecutive month, which has expanded for all but two of the last 131 months
The supplier deliveries index (which is inversed) was up 5.8 percentage points from the previous reading. Deliveries are slowing which is typical as the economy improves
There was a slight increase in the rate of services sector growth but various local and state-level shutdowns continue to put pressure on business recovery
All commodities were up in price, and construction contractors, PPE supplies, plastic products, steel products and sterile water in short supply
Source: Institute for Supply Management. Table created by The Macro Mail.
The services PMI numbers for November show improving growth across most of the components of the services index, with employment registering the only decline. New orders, which tend to lead the services index, grew at an increasing rate, suggesting cautious optimism in the pace of recovery going forward.
Sector Performance:
Management of Companies & Support services, Wholesale Trade and Retail Trade were the three strongest performing sectors during December
Arts, Entertainment & Recreation remained the worst performing sector as COVID related lockdown restrictions continue to hinder business performance
Source: Institute for Supply Management. Table created by The Macro Mail.
New Orders:
New orders tend to lead the overall ISM index so strength in new orders is an indication of future growth
Management of Companies & Support Services, Retail Trade and Healthcare & Social Assistance exhibited the strongest growth in new orders
Mining, which demonstrated strong growth in new orders in November showed no growth in December
Source: Institute for Supply Management. Table created by The Macro Mail.
Purchasing Manager Comments:
“Starting to see demand weakening as states go back to shut down. Will look to see business resume in late first quarter, as vaccine distribution takes place.” - Accommodation & Food Services
“Lack of labor continues to be a significant drag on the business. We have plenty of work but are now considering rejecting some orders due to shrinking capacity.” - Construction
“Deliveries as a whole, are slowing down considerably. Between COVID-19, the holidays, and inclement weather of late, the remainder of [2020] stands to be very challenging regarding maintaining adequate materials for operations.” - Professional, Scientific & Technical Services
“Business conditions are improving with increased volume, but [growth has] slowed slightly due to COVID-19 shutdowns in some states.” - Transportation & Warehousing
Source: Institute for Supply Management.
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