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Economy in Brief

U.S. ISM Services Index Improves Slightly in August
by Tom Moeller  September 6, 2022

• Business activity, new orders & employment move up.

• Employment and supplier delivery speeds ease.

• Prices weaken again.

The Services PMI from the Institute for Supply Management increased to 56.9 last month from 56.7 during July. The August reading was the highest in four months, but remained below the peak of 68.4 in November 2021. The Action Economics Forecast Survey expected a reading of 55.5 for August.

Haver Analytics constructs a composite index combining the services index and the manufacturing reading released last Thursday. This index rose to 56.4, a four- month high, from 56.3 in July. These series date back to July 1997. During the last 15 years, there has been a 68% correlation between the composite index and the quarterly change in real GDP.

In the latest services survey, the business activity index rose to 60.9 after surging to 59.9 in July. It remained at the highest level since December 2021. Twenty-eight percent (NSA) of respondents reported higher activity this month while 13% reported an activity decline. The new orders index strengthened to 61.8, the highest level since December. Thirty percent (NSA) of respondents reported more orders while 14% reported a decline.

The employment index rose to 50.2 last month from 49.1 in July, the first indication of rising payrolls in three months. Twenty percent (NSA) of respondents indicated higher employment while 22% reported a decline.

Working lower, the supplier deliveries index fell sharply to 54.5 (NSA) in August, indicating the quickest delivery speeds since February 2020. An improved 12% of respondents reported faster delivery speeds while a lessened 21% reported slower speeds.

The prices index declined to 71.5 in August after plunging to 72.3 in July. It was the lowest level since January of last year, down from a record 84.6 in April. A lessened 49% (NSA) of respondents reported price increases while an increased 8% reported price declines.

The new export orders index improved modestly to 61.9 in August from 59.5 in July, indicating expansion in new export orders for the seventh straight month. The order backlog index fell to 53.9, a three-month low. The inventory change index rose slightly to 46.2, still indicating inventory decumulation. The imports index was little changed at 48.2 in August after rising to 48.0 in July. These series are not seasonally adjusted and not included in the ISM Services PMI total.

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.

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