The U.S. services PMI expanded for the fourth consecutive month in October, rising from 54.9 in September to 56.0—its highest level since July 2022, according to data released by the Institute for Supply Management (ISM) on November 5.

Business Activity & New orders

In the subindices, the business activity index slightly declined from 59.9 to 57.2, and the new orders index fell from 59.9 to 57.4. However, both indices stayed in expansion territory for the fourth month, reflecting strong demand in the U.S. services sector.

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Employment & Supplier Delivery

The employment and supplier delivery indices also improved, with the employment index climbing from 48.1 to 53.0, reaching its highest level since August 2023. This improvement suggests that previous employment data may have been influenced by short-term factors like hurricanes and strikes. Meanwhile, the supplier delivery index increased from 49.6 to 52.1, likely indicating delayed delivery times due to disruptions from recent storms and port strikes.

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Other indices showed continued expansion, with the prices index marking its 89th consecutive month in growth, while export and import indices slightly softened but remained above 50.

Overall, October’s services PMI offers a solid start for U.S. economic data in the fourth quarter. According to the ISM report, the October services PMI correlates with an annualized real GDP growth rate of 2.3%.

This contrasts sharply with the manufacturing PMI, which was recorded at 46.5 in October, down 0.7 points from the prior month, marking seven consecutive months in contraction. The gap between the services and manufacturing PMIs widened to 9.5 points, underscoring the growing divergence between the two sectors.

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ISM Industry Comments

“Material availability and delivery continues to improve. The port strike had an impact, as we had to divert shipments, but the overall costs are not material. Services cost remains elevated but easier to negotiate.” – Accommodation & Food Services

“Monitoring inventories much closer than in the past. We’re refilling inventories for the fall and winter seasons are lower level than normal, but those decisions are easy to understand.” – Agriculture, Forestry, Fishing & Hunting

“Business is good. Building backlog. Commercial Construction is strong. Commercial Service is busy. All other areas are level.” – Construction

“Hurricane Helene seriously damaged an IV production plant in North Carolina, which was 60 percent of all national supply of IV bag fluid/solution. We are now starting to experience shortages. In addition, two hurricanes hit Florida, which impacted many of our lab vendors. Plus, the port workers’ strike impacts shipments of materials that our (U.S.) labs use to manufacture medicine and medical supplies. We anticipate a rise in prices and longer wait times, and most likely, shortages of some supplies.” – Health Care & Social Assistance

“Sadly, the recent hurricanes/tornadoes, and any future climate-related catastrophes, are good for the equipment sales and rental businesses. That and the continued infrastructure spending.” – Information

“Revenue cycles are lengthening. Good sales, but longer service periods. Commodity pricing is stabilizing as inflation concerns ease. Business is in a steady state, with everyone holding an even keel awaiting U.S. election results.” – Professional, Scientific & Technical Services

“Hurricane impacts have affected supplier deliveries.” – Real Estate, Rental & Leasing

“Port strikes did not impact our supply chain, but we confirmed all our strategic vendors had plans in place should they have an impact.” – Retail Trade

“Business is booming, nothing slowing down. Prices continue to increase slightly.” – Utilities

“The economy is still causing issues within our business and that of our suppliers.” – Wholesale Trade

• October 2024 Services ISM® Report On Business®