The Institute of Supply Management (ISM) has now released the August Services Purchasing Managers' Index (PMI). The headline Composite Index is at 56.9 percent and is up 0.2 from 56.7 last month. Today's number came in above the Investing.com forecast of 55.1 percent.

Here is the report summary:

(Tempe, Arizona) — Economic activity in the services sector grew in August for the 27th month in a row — with the Services PMI^® registering 56.9 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 August, the Services PMI^® registered 56.9 percent, 0.2 percentage point higher than July’s reading of 56.7 percent. The Business Activity Index registered 60.9 percent, an increase of 1 percentage point compared to the reading of 59.9 percent in July. The New Orders Index figure of 61.8 percent is 1.9 percentage points higher than the July reading of 59.9 percent.

“The Supplier Deliveries Index registered 54.5 percent, 3.3 percentage points lower than the 57.8 percent reported in July. (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 decreased for the fourth consecutive month in August, down 0.8 percentage point to 71.5 percent. Despite an improvement in inventory levels, services businesses still continue to struggle to replenish their stocks, as the Inventories Index contracted for the third consecutive month; the reading of 46.2 percent is up 1.2 percentage points from July’s figure of 45 percent. The Inventory Sentiment Index (47.1 percent, down 3 percentage points from July’s reading of 50.1 percent) moved back into contraction territory in August.”

Nieves continues, “According to the Services PMI^®, 14 industries reported growth. The composite index indicated growth for the 27th consecutive month after a two-month contraction in April and May 2020. Growth continues — at a slightly faster rate — for the services sector, which has expanded for all but two of the last 151 months. The services sector had a slight uptick in growth for the month of August due to increases in business activity, new orders and employment. Based on comments from Business Survey Committee respondents, there are some supply chain, logistics and cost improvements; however, material shortages remain a challenge. Employment improved slightly despite a restricted labor market.” [Source]

Unlike its much older kin, the ISM Manufacturing Series, there is 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 60.9 percent is up 1.0 from a seasonally adjusted 59.9 the previous month.

(Click on image to enlarge)

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.

(Click on image to enlarge)

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