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Economy in Brief

U.S. ISM Services Eases During October
by Tom Moeller  November 4, 2020

• Service sector activity slipped m/m, but remains firm.

• Component activity is mixed.

• Strength in pricing power resumes.

The Composite Index of Services Activity from the Institute for Supply Management fell to 56.6 during October and reversed its September increase to 57.8. A rise to 57.5 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 Monday. The composite index fell to 56.9 from 57.5 and has been moving sideways since the end of the recession. During the last 10 years, there has been a 54% 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 remained mixed last month. The index of business activity weakened to 61.2 from 63.0 in August. The reading has been falling since its July peak of 67.2. A higher 39% of respondents (NSA) reported improved activity while an increased 15% reported deterioration. The new orders index fell to 58.8 from a record high of 67.7 recorded in July. The employment measure slipped to 50.1, but remained up from a low of 30.0 in April. A slightly higher 20% of respondents reported more hiring and an increased 18% reported fewer jobs. Offsetting these declines, the supplier delivery series rose to 56.2 (NSA) and indicated slightly slower delivery speeds.

The prices index surge to 63.9 from 59.0, up from a low of 50.0 in March. A strengthened 31% of respondents reported higher prices, while a steady six percent reported prices lower. The percentage reporting no change in prices declined to 63. That compared to 80 in February.

The export orders series was fairly steady at 53.7 and remained up from the April low of 36.3. The imports index rose sharply to 52.5. The order backlogs index rose to 54.4 and made up most of September's decline. 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) Oct Sep Aug Oct'19 2019 2018 2017
Services PMI 56.6 57.8 56.9 54.4 55.5 59.0 56.9
   Business Activity 61.2 63.0 62.4 55.5 58.0 61.7 60.2
   New Orders 58.8 61.5 56.8 55.6 57.5 61.4 59.3
   Employment 50.1 51.8 47.9 53.9 54.9 56.9 55.1
   Supplier Deliveries (NSA) 56.2 54.9 60.5 52.5 51.5 55.8 53.2
Prices Index 63.9 59.0 64.2 57.3 57.6 62.1 57.7
ISM Manufacturing and Services Composite 56.9 57.5 56.8 53.8 55.0 59.0 57.0
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