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Economy in Brief

U.S. ISM Services Index Slips During November
by Tom Moeller  December 3, 2020

• Service sector activity weakened to six-month low.

• Component activity remained mixed.

• Pricing power strengthened.

The Composite Index of Services Activity from the Institute for Supply Management eased to 55.9 during November and added to its October decline to 56.6, down from July's high of 58.1. A reading of 56.2 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 Tuesday. The composite index fell to 56.1 from 56.9, the lowest level in six months. 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 58.0 from 61.2 in September. The reading has been falling since its July peak of 67.2. A greatly lessened 28% of respondents (NSA) reported improved activity while a steady 15% reported deterioration. The new orders index fell to 57.2 and remained below the record high of 67.7 recorded in July. Working the other way, the employment measure edged higher m/m to 51.5, up from the April low of 30.0. A reduced 16% of respondents reported more hiring while a lessened 15% reported fewer jobs. The supplier delivery series improved to 57.0 (NSA), indicating the slowest delivery speeds in three months.

The prices index surged to 66.1 from 63.9, up from a low of 50.0 in March. A strengthened 32% of respondents reported higher prices, while a steady six percent reported price declines. The percentage reporting no change in prices eased m/m to 62% compared to 80% in February.

The export orders series weakened 50.4 and was below the June high of 58.9. The imports index surged to 55.0, up from the March low of 40.2. The order backlogs index fell to 50.7 and reversed the October increase to 53.4. 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) Nov Oct Sep Nov '19 2019 2018 2017
Services PMI 55.9 56.6 57.8 53.9 55.5 59.0 56.9
   Business Activity 58.0 61.2 63.0 52.3 58.0 61.7 60.2
   New Orders 57.2 58.8 61.5 56.7 57.5 61.4 59.3
   Employment 51.5 50.1 51.8 54.9 54.9 56.9 55.1
   Supplier Deliveries (NSA) 57.0 56.2 54.9 51.5 51.5 55.8 53.2
Prices Index 66.1 63.9 59.0 58.8 57.6 62.1 57.7
ISM Manufacturing and Services Composite 56.1 56.9 57.5 53.3 55.0 59.0 57.0
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