Global| Jan 07 2021U.S. ISM Services Index Recovers at Yearend
by:Tom Moeller
|in:Economy in Brief
Summary
• Service sector activity continues to trend sideways. • Component activity remains mixed. • Pricing power eases. The Composite Index of Services Activity from the Institute for Supply Management rose to 57.2 during December after [...]
• Service sector activity continues to trend sideways.
• Component activity remains mixed.
• Pricing power eases.
The Composite Index of Services Activity from the Institute for Supply Management rose to 57.2 during December after declining to 55.9 in November. A reading of 54.5 had been expected in the Action Economics Forecast Survey. During all of 2020, the index fell to 54.3 from a 2018 recovery peak of 59.0.
Haver Analytics constructs a composite index combining the services index and the manufacturing reading which was released Tuesday. The composite index improved to 57.6 from 56.1, which was the lowest level since May. 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 rose to 59.4 from 58.0 in November. The reading remained below its July peak of 67.2. An improved 31% of respondents (NSA) reported better activity but a higher 18% reported deterioration. The new orders index edged up to 58.5 but remained below the record high of 67.7 recorded in July. The employment measure fell m/m to 48.2, its lowest level since August. A reduced 15% of respondents reported more hiring while a strengthened 19% reported fewer jobs. The supplier delivery series surged to 62.8 (NSA), indicating the slowest delivery speeds since May.
The prices index fell back to 64.8 last month after rising to 66.1 in November. The figure remained up from a low of 50.0 in March. A lessened 27% of respondents reported higher prices, while a reduced five percent reported price declines. The percentage reporting no change in prices rose m/m to 68%, but remained below 80% in February.
The export orders series surged to 57.3, its highest level in six months. The imports index fell to 51.8, but remained up from the March low of 40.2. The order backlogs index fell sharply to 48.7, its lowest level since May. 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) | Dec | Nov | Oct | Dec '19 | 2020 | 2019 | 2018 |
|---|---|---|---|---|---|---|---|
| Services PMI | 57.2 | 55.9 | 56.6 | 54.9 | 54.3 | 55.5 | 59.0 |
| Business Activity | 59.4 | 58.0 | 61.2 | 52.3 | 55.9 | 58.0 | 61.7 |
| New Orders | 58.5 | 57.2 | 58.8 | 56.7 | 55.8 | 57.5 | 61.4 |
| Employment | 48.2 | 51.5 | 50.1 | 54.8 | 46.0 | 54.9 | 56.9 |
| Supplier Deliveries (NSA) | 62.8 | 57.0 | 56.2 | 52.5 | 59.6 | 51.5 | 55.8 |
| Prices Index | 64.8 | 66.1 | 63.9 | 59.3 | 58.8 | 57.6 | 62.1 |
| ISM Manufacturing and Services Composite | 57.6 | 56.1 | 56.9 | 54.1 | 54.1 | 55.0 | 59.0 |
Tom Moeller
AuthorMore in Author Profile »Prior to joining Haver Analytics in 2000, Mr. Moeller worked as the Economist at Chancellor Capital Management from 1985 to 1999. There, he developed comprehensive economic forecasts and interpreted economic data for equity and fixed income portfolio managers. Also at Chancellor, Mr. Moeller worked as an equity analyst and was responsible for researching and rating companies in the economically sensitive automobile and housing industries for investment in Chancellor’s equity portfolio. Prior to joining Chancellor, Mr. Moeller was an Economist at Citibank from 1979 to 1984. He also analyzed pricing behavior in the metals industry for the Council on Wage and Price Stability in Washington, D.C. In 1999, Mr. Moeller received the award for most accurate forecast from the Forecasters' Club of New York. From 1990 to 1992 he was President of the New York Association for Business Economists. Mr. Moeller earned an M.B.A. in Finance from Fordham University, where he graduated in 1987. He holds a Bachelor of Arts in Economics from George Washington University.
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