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Chart and excerpts below by permission from the Institute for Supply Management® ISM® 

Please consider the June 2023 Services ISM^® Report On Business^® emphasis mine

Economic activity in the services sector expanded in June for the sixth consecutive month as the Services PMI® registered 53.9 percent, say the nation’s purchasing and supply executives in the latest Services ISM® Report On Business^®. The sector has grown in 36 of the last 37 months, with the lone contraction in December of last year.

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 June, the Services PMI® registered 53.9 percent, 3.6 percentage points higher than May’s reading of 50.3 percent. The composite index indicated growth in June for the sixth consecutive month after a reading of 49.2 percent in December, which was the first contraction since May 2020 (45.4 percent).

“Fifteen industries reported growth in June. The Services PMI®, by being above 50 percent for the sixth month after a single month of contraction and a prior 30-month period of expansion, continues to indicate sustained growth for the sector. The composite index has indicated expansion for all but three of the previous 160 months.”

Nieves continues, “There has been an uptick in the rate of growth for the services sector. This is due mostly to the increase in business activity, new orders and employment. Increased capacity, backlog reduction and continued improvements in logistics have impacted delivery times (resulting in a decrease in the Supplier Deliveries Index). The majority of respondents indicate that business conditions remain stable; however, they are cautious relative to inflation and the future economic outlook.”

Prices have increased 73 consecutive months, albeit at a slower pace in June.

ISM Manufacturing Dips to 46 Percent, 8th Straight Month of Contraction

It’s a tale of two different economies as ISM Manufacturing Dips to 46 Percent, 8th Straight Month of Contraction

Economic activity in the manufacturing sector contracted in June for the eighth consecutive month following a 28-month period of growth according to the Institute for Supply Management.

For the first time during this manufacturing downturn, every ISM^® subcategory is in contraction.

In response to the manufacturing report, several people commented that manufacturing is only 10 percent of the economy. That’s not really the case, because the summations do not count intermediate activity, only final sales. I will do a report on this idea later.

Diffusion Index Comments

The ISM is a diffusion index, signaling direction not amount. For example a firm hiring 10 workers and a firm laying off 200 workers balances out.

And there is a survival bias and a weighting bias.

Divergences

• GDP vs GDI: Largest Discrepancy Between GDP and GDI in 20 Years
• Jobs vs Employment: Jobs Grow by 372,000 but Employment Shrinks by 315,000

ISM is another divergence in this strangest of strange economies. ISM manufacturing signals a recession that isn’t here unless Gross Domestic Income (GDI) is correct.

We have not seen an economy anything like this one for something like forever.

More By This Author:

New Factory Orders In May Are Led By Strong Increase In Transportation Sector
ISM Manufacturing Dips To 46 Percent, 8th Straight Month Of Contraction
Real Consumer Spending Slumps In May With Significant Negative Revisions