ISM: Service Sector Shrinks in February

The ISM Services Index registered 56.5% in February; 3.4 percentage points below the January reading of 59.9%. This reading represents the 21st straight month of growth for the services sector, which has expanded for all but two of the last 145 months.

Fourteen non-manufacturing industries reported growth in February. Survey respondents noted “Raw material increases, labor shortages, wage increases and transportation issues are still the primary issues affecting our operations and pricing.”

The Business Activity Index registered 55.1% in February, a decrease of 4.8 percentage points from the January reading of 56.1%. This represents growth for the twenty-first consecutive month.

Service sector employment contracted in February for the first time since June 2021, and registered 48.5% in February, 3.8 percentage points lower than January. Seven industries reported growth in employment for the month.

The New Orders Index was 56.1%, down 5.6% from the prior month. Comments from respondents include: Supply disruptions have left businesses unable to meet surging demand” and “Typical slowdown after the holiday season.”

The supplier deliveries index registered 66.2% in February, up 0.5% from the prior month. A reading above 50% indicates slower deliveries.

Read the ISM release.