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Economy in Brief

U.S. ISM Services Slips in August
by Tom Moeller  September 3, 2020

• Though easing slightly, service sector activity remains firm.

• Component activity is mixed.

• Pricing power strengthens.

The Composite Index of Services Activity from the Institute for Supply Management fell to 56.9 during August after strengthening to 58.1 in July. A reading of 57.1 had been expected in the Action Economics Forecast Survey.

Haver Analytics constructs a composite index combining the services index and the manufacturing reading which was released on Tuesday. The composite index fell to 56.8 from 57.7. During the last 15 years, there has been a 49% correlation between the index level and the q/q change in real GDP. The composite is based on GDP shares.

Changes in the component series were mixed last month. The index of business activity declined to 62.4 after surging to 67.2 in July. It was the third consecutive reading above the break-even level of 50 after three months below it. A reduced 37% of respondents (NSA) reported improved activity while a steady 15% reported deterioration. The new orders index fell to 56.8 after rising to a record high of 67.7 in July. To the upside, the employment measure rose to 47.9, its highest level in six months. An improved 21% of respondents reported more hiring and a lessened 28% reporting fewer jobs. The supplier delivery series also rose to 60.5 (NSA), indicating slower delivery speeds.

The prices index strengthened to 64.2, the highest level since November 2018 and up from the March 2020 low of 50. An increased 32% of respondents reported higher prices, while a steady six percent reported prices lower. The percentage reporting no change in prices declined sharply to 63%.

The export orders series rebounded to 55.8 and recovered most of July's decline, while the imports index also rose to 50.8. The order backlogs index strengthened to the highest level since September 2018. These series are not seasonally adjusted and are not included in the nonmanufacturing composite.

The ISM figures are available in Haver's USECON database, with additional detail in the SURVEYS database. The expectations figure from Action Economics is in the AS1REPNA database.

ISM Services Survey (SA) Aug Jul Jun Aug'19 2019 2018 2017
Services PMI 56.9 58.1 57.1 56.0 55.5 59.0 56.9
   Business Activity 62.4 67.2 66.0 60.4 58.0 61.7 60.2
   New Orders 56.8 67.7 61.6 59.6 57.5 61.4 59.3
   Employment 47.9 42.1 43.1 53.7 54.9 56.9 55.1
   Supplier Deliveries (NSA) 60.5 55.2 57.5 50.5 51.5 55.8 53.2
Prices Index 64.2 57.6 62.4 58.4 57.6 62.1 57.7
ISM Manufacturing and Services Composite 56.8 57.7 56.6 55.2 55.0 59.0 57.0
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