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June 2022 Services PMI - 55.3%

July 7, 2022

Economic activity in the services sector grew in June for the 25th month in a row — with the Services PMI® registering 55.3 percent — 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: "In June, the Services PMI® registered 55.3 percent, 0.6 percentage point lower than May's reading of 55.9 percent. This is the lowest reading since May 2020 (45.2 percent). The Business Activity Index registered 56.1 percent, an increase of 1.6 percentage points compared to the reading of 54.5 percent in May. The New Orders Index figure of 55.6 percent is 2 percentage points lower than the May reading of 57.6 percent.

"The Supplier Deliveries Index registered 61.9 percent, 0.6 percentage point higher than the 61.3 percent reported in May. (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 dropped for the second consecutive month in June, decreasing 2 percentage points to 80.1 percent. Services businesses continue to struggle to replenish inventories, as the Inventories Index contracted for the first time since January 2022; the reading of 47.5 percent is down 3.5 percentage points from May's figure of 51 percent. The Inventory Sentiment Index (46.2 percent, up 1.7 percentage points from May's reading of 44.5 percent) contracted in June for the fourth consecutive month, indicating that inventories are in 'too low' territory and insufficient for current business requirements."

Nieves continues, "According to the Services PMI®, all 18 industries reported growth. The composite index indicated growth for the 25th consecutive month after a two-month contraction in April and May 2020. Growth continues — albeit slower — for the services sector, which has expanded for all but two of the last 149 months. The slight slowdown in services sector growth was due to a decline in new orders and employment. The Employment Index (47.4 percent) contracted, and the Backlog of Orders Index grew 8.5 percentage points, to 60.5 percent. Logistical challenges, a restricted labor pool, material shortages, inflation, the coronavirus pandemic and the war in Ukraine continue to negatively impact the services sector."

INDUSTRY PERFORMANCE

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

WHAT RESPONDENTS ARE SAYING

  • "Supply chain and supplier reliability continues to improve for most of our key food and packaging needs. Equipment still (experiencing) typical long delays. Staffing employment challenges have resurfaced, and costs have dramatically increased on core needs, led by soybean oil products. Rise in diesel fuel affecting almost everything." [Accommodation & Food Services]
  • "(Interest) rate increases have slowed sales but have not helped with supply challenges yet." [Construction]
  • "While activity dropped 2 percent from the previous month, activity volume was 47 percent higher compared to May 2021." [Educational Services]
  • "It seems like everyone is jumping on the bandwagon (of) raising prices under the guise of inflation, cost of energy and shortages. Cost on even software renewals have gone up between 5 and 10 percent. This is getting out of control, and we need to be diligent in researching the cause of rising prices on every transaction." [Public Administration]
  • "The shutdowns in China due to the zero-COVID policy have adversely impacted our supply chain." [Health Care & Social Assistance]
  • "Demand has softened across consumer product lines, channels and brands over the last year, to levels below those forecast earlier this year. Adjusting all outlooks down for the rest of year. The (Shanghai) omicron slowdown had an impact, but activity is slowly coming back." [Information]
  • "Energy services sector demand and activity remains strong." [Mining]
  • "Consumers are shifting purchases away from our discretionary products to essentials. Inflation is definitely taking a bite from our sales, and mall traffic is far below the norm, potentially due to inflation, a need for more disposable income on essentials and less willingness to drive to malls. E-commerce sales will be going up again." [Retail Trade]
  • "Despite higher inflation and energy costs, demand and business activity continue to be at record highs, with little sign of a slowdown." [Utilities]
  • "Business continues to stay steady amid rising interest rates, a lack of labor, inflation, transportation problems and high gas/diesel prices. Outlook is measured due to economic headwinds." [Wholesale Trade]

ISM® SERVICES SURVEY RESULTS AT A GLANCE

COMPARISON OF ISM® SERVICES AND ISM® MANUFACTURING SURVEYS

June 2022

Index

 Services PMI®

Manufacturing PMI®

Series
Index

Jun

Series
Index

May

Percent
Point
Change

 

 

Direction

 

Rate of
Change

 

Trend*

(Months)

Series
Index

Jun

Series
Index

May

Percent
Point
Change

Services PMI®

55.3

55.9

-0.6

Growing

Slower

25

53.0

56.1

-3.1

Business Activity/

Production

56.1

54.5

+1.6

Growing

Faster

25

54.9

54.2

+0.7

New Orders

55.6

57.6

-2.0

Growing

Slower

25

49.2

55.1

-5.9

Employment

47.4

50.2

-2.8

Contracting

From Growing

1

47.3

49.6

-2.3

Supplier Deliveries

61.9

61.3

+0.6

Slowing

Faster

37

57.3

65.7

-8.4

Inventories

47.5

51.0

-3.5

Contracting

From Growing

1

56.0

55.9

+0.1

Prices

80.1

82.1

-2.0

Increasing

Slower

61

78.5

82.2

-3.7

Backlog of Orders

60.5

52.0

+8.5

Growing

Faster

18

53.2

58.7

-5.5

New Export Orders

57.5

60.9

-3.4

Growing

Slower

5

50.7

52.9

-2.2

Imports

46.3

52.8

-6.5

Contracting

From Growing

1

50.7

48.7

+2.0

Inventory Sentiment

46.2

44.5

+1.7

Too Low

Slower

4

N/A

N/A

N/A

Customers' Inventories

N/A

N/A

N/A

N/A

N/A

N/A

35.2

32.7

+2.5

OVERALL ECONOMY

Growing

Slower

25


 

Services Sector

Growing

Slower

25


 

Services ISM® Report On Business® data is seasonally adjusted for the Business Activity, New Orders, Employment and Prices 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 Products (7); Chemicals (3); Chicken (10); Construction Materials (2); Diesel Fuel (19); Electrical Components (17); Electronic Components (7); Food and Beverages (3); Food Products (4); Fuel (18); Fuel Related Products (4); Gasoline (19); Hotel Rates (2); Janitorial Supplies; Lab Supplies; Labor (19); Labor — Temporary (5); Logistics Services; Paint; Plastic Products (11); Resin (2); Steel Products (18); Transformers; Travel (2); and Wire Cable.

Commodities Down in Price
Cleaning Supplies; Lumber; Oriented Strand Board (OSB); and Polyvinyl Chloride (PVC) Products.

Commodities in Short Supply
Appliances (4); Baby Formula (2); Contrast Media (2); Diesel Fuel (2); Electrical Components (3); Electronic Components (7); Garage Doors; Lab Supplies; Labor (11); Microchips (2); Needles and Syringes (6); Paper Products (4); Sugar; and Transformers (2).

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

JUNE 2022 SERVICES INDEX SUMMARIES

Services PMI®
In June, the Services PMI® registered 55.3 percent, a 0.6-percentage point decrease compared to the May reading of 55.9 percent. The 12-month average is 60.8 percent, reflecting consistently strong growth in the services sector, which has expanded for 25 consecutive months. The June reading, however, set a 12-month low for a second consecutive month and is the lowest since May 2020, when the index registered 45.2 percent. 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 50.1 percent, over time, generally indicates an expansion of the overall economy. Therefore, the June Services PMI® indicates the overall economy has followed the same path as the services sector: expansion for 25 straight months following two months of contraction and a preceding period of 122 months of growth. Nieves says, "The past relationship between the Services PMI® and the overall economy indicates that the Services PMI® for June (55.3 percent) corresponds to a 1.9-percent increase in real gross domestic product (GDP) on an annualized basis."

SERVICES PMI® HISTORY

Month

Services PMI®

Month

Services PMI®

Jun 2022

55.3

Dec 2021

62.3

May 2022

55.9

Nov 2021

68.4

Apr 2022

57.1

Oct 2021

66.7

Mar 2022

58.3

Sep 2021

62.6

Feb 2022

56.5

Aug 2021

62.2

Jan 2022

59.9

Jul 2021

64.1

Average for 12 months – 60.8

High – 68.4

Low – 55.3

Business Activity
ISM®'s Business Activity Index registered 56.1 percent in June, an increase of 1.6 percentage points from the reading of 54.5 percent in May, indicating growth for the 25th consecutive month. Comments from respondents include: "Higher customer demand and more capacity online" and "Business is higher but slower than expected due to summer holidays; customers and employees are on vacation."

The 15 industries reporting an increase in business activity for the month of June — listed in order — are: Management of Companies & Support Services; Construction; Other Services; Accommodation & Food Services; Arts, Entertainment & Recreation; Mining; Professional, Scientific & Technical Services; Utilities; Finance & Insurance; Wholesale Trade; Educational Services; Health Care & Social Assistance; Information; Transportation & Warehousing; and Public Administration. No industry reported a decrease in business activity for the month of June.

Business Activity

%Higher

%Same

%Lower

Index

Jun 2022

27.0

60.5

12.5

56.1

May 2022

27.1

59.6

13.3

54.5

Apr 2022

37.8

55.7

6.5

59.1

Mar 2022

30.7

54.6

14.7

55.5

New Orders
ISM®'s New Orders Index registered 55.6 percent, down 2 percentage points from the May reading of 57.6 percent. New orders grew for the 25th consecutive month after two months of contraction and a preceding period of 128 months of expansion. Comments from respondents include: "More demand for financing to beat (interest) rate increases" and "New customers added, which has led to greater sales orders and business activity."

Thirteen industries reported growth of new orders in June, in the following order: Accommodation & Food Services; Mining; Management of Companies & Support Services; Other Services; Arts, Entertainment & Recreation; Transportation & Warehousing; Real Estate, Rental & Leasing; Utilities; Health Care & Social Assistance; Wholesale Trade; Finance & Insurance; Professional, Scientific & Technical Services; and Public Administration. The two industries reporting a decrease in new orders in June are: Construction; and Educational Services.

New Orders

%Higher

%Same

%Lower

Index

Jun 2022

28.3

57.7

14.0

55.6

May 2022

31.2

54.7

14.1

57.6

Apr 2022

32.9

55.6

11.5

54.6

Mar 2022

31.0

58.0

11.0

60.1

Employment
Employment activity in the services sector contracted in June for the third time in the last five months. ISM®'s Employment Index registered 47.4 percent, down 2.8 percentage points from the reading of 50.2 percent registered in May. Comments from respondents include: "Unable to fill positions with qualified applicants" and "Extremely hard to find truck drivers." Also: "Demand for talent is higher, but availability of candidates to fill open roles continues to keep employment levels from increasing."

The seven industries reporting an increase in employment in June — listed in order — are: Mining; Construction; Wholesale Trade; Other Services; Professional, Scientific & Technical Services; Public Administration; and Health Care & Social Assistance. The five industries reporting a decrease in employment in June are: Real Estate, Rental & Leasing; Agriculture, Forestry, Fishing & Hunting; Accommodation & Food Services; Finance & Insurance; and Educational Services. Six industries reported no change in June.

Employment

%Higher

%Same

%Lower

Index

Jun 2022

20.4

60.1

19.5

47.4

May 2022

26.1

51.2

22.7

50.2

Apr 2022

24.6

52.3

23.1

49.5

Mar 2022

24.9

59.4

15.7

54.0

Supplier Deliveries
The Supplier Deliveries Index registered 61.9 percent, up 0.6 percentage point from the 61.3 percent registered in May. A reading above 50 percent indicates slower deliveries, while a reading below 50 percent indicates faster deliveries. Comments from respondents include: "Fill rates are down significantly; receiving activity levels still up due to multiple shipments to fulfill requirements" and "Port backups and container shortages continue."

The 16 industries reporting slower deliveries in June — listed in order — are: Agriculture, Forestry, Fishing & Hunting; Real Estate, Rental & Leasing; Retail Trade; Public Administration; Utilities; Arts, Entertainment & Recreation; Health Care & Social Assistance; Construction; Transportation & Warehousing; Information; Management of Companies & Support Services; Other Services; Professional, Scientific & Technical Services; Finance & Insurance; Educational Services; and Wholesale Trade. No industry reported faster deliveries in June.

Supplier Deliveries

%Slower

%Same

%Faster

Index

Jun 2022

28.8

66.2

5.0

61.9

May 2022

27.4

67.7

4.9

61.3

Apr 2022

34.0

62.2

3.8

65.1

Mar 2022

32.7

61.4

5.9

63.4

Inventories
The Inventories Index contracted in June after four consecutive months of growth and a preceding eight months of contraction. The reading of 47.5 percent was a 3.5-percentage point decrease from the 51 percent reported in May. Of the total respondents in June, 43 percent indicated they do not have inventories or do not measure them. Comments from respondents include: "Some items have too much stock, and others are in short supply" and "Longer supplier lead times and poor delivery performance causing us to use up existing inventory."

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

Inventories

%Higher

%Same

%Lower

Index

Jun 2022

20.2

54.7

25.1

47.5

May 2022

24.7

52.7

22.6

51.0

Apr 2022

22.4

59.7

17.9

52.3

Mar 2022

23.1

57.1

19.8

51.7

Prices
Prices paid by services organizations for materials and services increased in June for the 61st consecutive month, with the index registering 80.1 percent, 2 percentage points lower than the 82.1 percent that was recorded in May.

All 18 services industries reported an increase in prices paid during the month of June, in the following order: Arts, Entertainment & Recreation; Mining; Transportation & Warehousing; Public Administration; Retail Trade; Accommodation & Food Services; Educational Services; Wholesale Trade; Information; Professional, Scientific & Technical Services; Real Estate, Rental & Leasing; Finance & Insurance; Construction; Utilities; Health Care & Social Assistance; Management of Companies & Support Services; Other Services; and Agriculture, Forestry, Fishing & Hunting.

Prices

%Higher

%Same

%Lower

Index

Jun 2022

66.1

32.2

1.7

80.1

May 2022

72.2

26.8

1.0

82.1

Apr 2022

75.4

24.4

0.2

84.6

Mar 2022

72.9

26.5

0.6

83.8

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 June for the 18th consecutive month. The index registered 60.5 percent, an 8.5-percentage point increase compared to the May reading of 52 percent. Of the total respondents in June, 44 percent indicated they do not measure backlog of orders. Respondent comments include: "Supply chain issues, transit issues and scarcity of supplies" and "Continuing challenges with shipment delays and (maintaining) in-stock rate; demand increased quite a bit as well."

The 10 industries reporting an increase in order backlogs in June — listed in order — are: Management of Companies & Support Services; Real Estate, Rental & Leasing; Utilities; Professional, Scientific & Technical Services; Information; Educational Services; Public Administration; Construction; Finance & Insurance; and Health Care & Social Assistance. The four industries reporting a decrease in order backlogs in June are: Agriculture, Forestry, Fishing & Hunting; Retail Trade; Mining; and Wholesale Trade.

Backlog of Orders

%Higher

%Same

%Lower

Index

Jun 2022

32.0

57.1

10.9

60.5

May 2022

17.4

69.2

13.4

52.0

Apr 2022

26.4

66.1

7.5

59.4

Mar 2022

33.1

62.9

4.0

64.5

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 57.5 percent, a 3.4-percentage point decrease from the 60.9 percent reported in May. Of the total respondents in June, 79 percent indicated they 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: Real Estate, Rental & Leasing; Arts, Entertainment & Recreation; Mining; Utilities; Professional, Scientific & Technical Services; and Wholesale Trade. The four industries reporting a decrease in new export orders in June are: Construction; Educational Services; Information; and Transportation & Warehousing. Eight industries indicated no change in new export orders in June.

New Export Orders

%Higher

%Same

%Lower

Index

Jun 2022

19.9

75.3

4.8

57.5

May 2022

27.1

67.6

5.3

60.9

Apr 2022

22.4

71.4

6.2

58.1

Mar 2022

29.1

63.8

7.1

61.0

Imports
The Imports Index contracted in June after two consecutive months of growth, registering 46.3 percent, down 6.5 percentage points from May's reading of 52.8 percent. Seventy-four 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 June are: Arts, Entertainment & Recreation; Management of Companies & Support Services; Utilities; and Professional, Scientific & Technical Services. The five industries that reported a decrease in imports in June are: Retail Trade; Other Services; Information; Transportation & Warehousing; and Health Care & Social Assistance. Nine industries reported no change in imports in June.

Imports

%Higher

%Same

%Lower

Index

Jun 2022

7.0

78.6

14.4

46.3

May 2022

14.1

77.6

8.3

52.8

Apr 2022

13.6

78.6

7.8

52.9

Mar 2022

11.9

66.2

21.9

45.0

Inventory Sentiment
The ISM® Services Inventory Sentiment Index contracted in June for the fourth month in a row, registering 46.2 percent, a 1.7-percentage point increase from May's figure of 44.5 percent. This reading indicates that respondents feel their inventories are too low when correlated to business activity levels.

The three industries reporting sentiment that their inventories were too high in June are: Mining; Wholesale Trade; and Health Care & Social Assistance. The six industries reporting a feeling that their inventories were too low in June — listed in order — are: Real Estate, Rental & Leasing; Accommodation & Food Services; Management of Companies & Support Services; Professional, Scientific & Technical Services; Information; and Utilities. Nine industries reported no change in June.

Inventory Sentiment

%Too

High

%About Right

%Too

Low

Index

Jun 2022

19.4

53.6

27.0

46.2

May 2022

21.7

45.6

32.7

44.5

Apr 2022

21.0

51.4

27.6

46.7

Mar 2022

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