The Institute of Supply Management (ISM) has now released the March Services Purchasing Managers' Index (PMI). The headline Composite Index is at 58.3 percent, up 1.8 from 56.5 last month. Today's number came in slightly below the Investing.com forecast of 58.4 percent.

Here is the report summary:

(Tempe, Arizona) — Economic activity in the services sector grew in March for the 22nd month in a row — with the Services PMI^® registering 58.3 percent — say the nation's purchasing and supply executives in the latest Services ISM^® Report On Business^®.

The report was issued today by Anthony Nieves, CPSM, C.P.M., A.P.P., CFPM, Chair of the Institute for Supply Management^® (ISM^®) Services Business Survey Committee: “In March, the Services PMI^® registered 58.3 percent, 1.8 percentage points higher than February’s reading of 56.5 percent. The Business Activity Index registered 55.5 percent, an increase of 0.4 percentage point compared to the reading of 55.1 percent in February, and the New Orders Index figure of 60.1 percent is 4 percentage points higher than the February reading of 56.1 percent.

“The Supplier Deliveries Index registered 63.4 percent, 2.8 percentage points lower than the 66.2 percent reported in February. (Supplier Deliveries is the only ISM^® Report On Business^® index that is inversed; a reading of above 50 percent indicates slower deliveries, which is typical as the economy improves and customer demand increases.)

“The Prices Index registered 83.8 percent, up 0.7 percentage point from the February figure of 83.1 percent and its second-highest reading ever, behind December 2021 (83.9 percent). Services businesses are continuing to replenish inventories, as the Inventories Index expanded for a second straight month; the reading of 51.7 percent is up 0.9-percentage point from February’s figure of 50.8 percent. The Inventory Sentiment Index (40.2 percent, down 15.1 percentage points from February’s reading of 55.3 percent) returned to contraction in March, indicating that inventories are in ‘too low’ territory and not meeting current business requirements.”

Nieves continues, “According to the Services PMI^®, 17 industries reported growth. The composite index indicated growth for the 22nd consecutive month after a two-month contraction in April and May 2020. Growth continues for the services sector, which has expanded for all but two of the last 146 months. There was an uptick in business activity in March, but respondents have indicated that they continue to be impacted by capacity constraints, logistical challenges and inflation. Labor shortages have eased slightly, as COVID-19 cases have declined and public-health restrictions have been relaxed. Geopolitical concerns — particularly the Russia/Ukraine war, which has impacted material costs, most notably fuel and chemical prices — have created uncertainty for many businesses.” [Source]

Unlike its much older kin, the ISM Manufacturing Series, there is a relatively little history for ISM's Non-Manufacturing data, especially for the headline Composite Index, which dates from 2008. The chart below shows the Non-Manufacturing Composite.

The more interesting and useful subcomponent is the Non-Manufacturing Business Activity Index. The latest data point at 58.3 percent is up 1.8 from a seasonally adjusted 59.9 the previous month.

For a diffusion index, this can be an extremely volatile indicator, hence the addition of a six-month moving average to help us visualize the short-term trends.

Theoretically, this indicator should become more useful as the time frame of its coverage expands. Manufacturing may be a more sensitive barometer than Non-Manufacturing activity, but we are increasingly a services-oriented economy, which explains our intention to keep this series on the radar.

Here is a table showing the trend in the underlying components.

Here is a link to our coverage of the latest ISM Manufacturing report.