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Economy in Brief

U.S. ISM Services Index Sets Record in July
by Tom Moeller  August 4, 2021

• Increase unexpectedly reversed June decline.

• All sub-categories improved.

• Pricing power increases to near-record level.

The Composite Index of Services Activity rose to 64.1 during July from 60.1 in June. It topped the May record of 64.0. The data extend back to July 1997. A lesser increase to 60.6 had been expected in the Action Economics Forecast Survey. The report of improvement in service sector business activity follows Monday's report of a weakening in factory sector business.

Haver Analytics constructs a composite index combining the services index and the manufacturing reading. The composite index rose to a near-record 63.6 last month from 60.2 in June. During the last 10 years, there has been a 51% correlation between the index level and the q/q change in real GDP. The composite is based on GDP shares.

The business activity reading rose to 67.0, its highest point since March. The new orders index rose to 63.7 as 36.2% (NSA) of respondents reported higher new orders and a reduced 4.6% reported a decline. The employment reading rose to 53.8, indicating a rise in hiring for the sixth month this year. The supplier delivery index surged to 72.0 from 68.5. An increased 45.8% (NSA) of firms reported slower delivery speeds while a lessened 1.7% reported them quicker.

The prices index weakened to 82.3 last month after rising to 79.5 in June. The reading was topped only by 83.5 in September 2005. An increased 66.7% of respondents reported higher prices while an increased 0.8% reported price declines. The percentage reporting no change in prices fell to 32.5% and remained well below its 80.4% high in February of last year.

The order backlog index eased to 63.5 from the record 65.8 in June. The export orders series rebounded to top a record 65.8. The imports index fell sharply to 51.6 and reversed most of its June increase. These series are not seasonally adjusted and are not included in the nonmanufacturing composite total.

The ISM figures are available in Haver's USECON database, with additional detail in the SURVEYS database. The series dates back to July 1997. The expectations figure from Action Economics is in the AS1REPNA database.

ISM Services Survey (SA) Jul Jun May Jul '20 2020 2019 2018
Services PMI 64.1 60.1 64.0 56.6 54.3 55.5 59.0
   Business Activity 67.0 60.4 66.2 63.8 55.8 58.0 61.6
   New Orders 63.7 62.1 63.9 64.8 55.6 57.6 61.5
   Employment 53.8 49.3 55.3 42.6 46.0 55.0 56.9
   Supplier Deliveries (NSA) 72.0 68.5 70.4 55.3 59.7 51.5 55.8
Prices Index 82.3 79.5 80.6 57.6 58.6 57.5 62.0
ISM Mfg. & Services (Haver Composite) 63.6 60.2 63.7 56.3 54.1 55.0 58.9
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