The Composite Services Index of the Institute for Supply Management rose 58.3 percent in March, up from 1.88 percent in the previous month. The index stays above neutral and suggests a 22nd consecutive month of expansion for the service sector and the wider economy (see top of chart first). Moreover, the level is consistent with the results of the economic expansion from 2010 to 2019. Respondents to the survey suggested easing labor shortages due to the Russian aggression in Ukraine, but continued material shortages, logistical problems and price pressures, as well as new high levels of uncertainty.
Among the key components of the Services Index, the Business Activity Index rose 0.4 points to 55.5 (see top of first chart). This is the 22nd month above 50 and is generally consistent with the period 2010 to 2019, though below the threshold.
The service’s new-order index rose to 60.1 percent from 56.1 percent in February, an increase of 4.0 percentage points (see chart below). The new orders index has been above 50 percent for 22 months and is at a favorable level compared to the previous economic expansion.
The non-manufacturing New-Export-Order Index, a separate index that only measures export orders, rebounded in March, coming in at 61.0, up from 53.0 percent in February. Nine industries reported an increase in export orders as opposed to three reporting declines. However, for all respondents, about 25 percent said they perform and track activity separately outside the United States.
The backlog of orders in the services sector rose again in March as the index rose from 64.2 percent to 64.5 percent. March was the 15thM Months in a row with increasing backlog. Eleven industries reported higher backlogs in March when one fell. The service employment index rebounded in March, coming in at 54.0 percent, up from 48.5 percent in February (see first chart below). Thirteen industries reported an increase in employment and five reported a decrease. The new COVID-19 case reduction and relaxation of public health restrictions were cited as contributing to somewhat easing the labor shortage.
Supplier Delivery, a measure of supply time for non-producer suppliers, came in at 63.4 percent, down from 66.2 percent in the previous month but still an improved result (see at the top of the second chart). This suggests that suppliers are lagging further behind in the service business, but slippage is down slightly from the previous month. Even so, the overall level of the index is historically high. Sixteen industries reported slower delivery in March while one reported faster delivery.
The non-manufacturing price-paid index rose to 83.8 percent, up from 83.1 percent in February and to an all-time high of 83.9 percent in December 2021 (see second chart below). All eighteen industries reported higher prices for inputs in March.
The March report of the Institute of Supply Management suggested that the services sector and the wider economy expanded for the 22nd consecutive month in March. Respondents to the survey cited strong demand but continued price pressures, equipment shortages and logistical and transportation problems. However, there has been some progress in recruitment as the latest wave of COVID-19 has been crested and public restrictions have been relaxed. Unfortunately, the geopolitical instability caused by Russia’s aggression in Ukraine has had a dramatic effect on capital and commodity markets, intensifying the price pressures of energy and chemical products in particular and launching new waves of potential disruption to the world economy, the supply chain. , And business activity.
Robert Hughes
Robert Hughes joined AIER in 2013 for over 25 years researching economic and financial markets on Wall Street. Bob was previously head of Brown Brothers Harriman’s Global Equity Strategy, where he developed an equity investment strategy that combines top-down macro analysis with bottom-up fundamentals.
Prior to BBH, Bob was a senior equity strategist at State Street Global Markets, a senior economic strategist at Prudential Equity Group, and a senior economist at Citicorp Investment Services and a financial markets analyst. Bob holds an MA in Economics from Fordham University and a BS in Business from Lehigh University.