The ISM Services Index decreased 2.7 percentage points (pp) to 50.8%, the lowest Services PMI reading since June 2024 (49.2%).
“Ten industries reported growth in March, a drop of four from the 14 industries reported in each of the previous two months. The Services PMI has expanded in 55 of the last 58 months dating back to June 2020. “March saw drops in the readings of three (New Orders, Employment and Supplier Deliveries) of the four subindexes that directly factor into the Services PMI. Only Business Activity saw an increase over February’s reading. Employment was the only one of these subindexes to drop into contraction territory after three straight months with all four in expansion. Despite an increase in comments on tariff impacts and continuing concerns over potential tariffs and declining governmental spending, there was a close balance in near-term sentiment, between panelists with good outlooks and those seeing or expecting declines” said Steve Miller, CPSM, CSCP, Chair of the Institute for Supply Management® (ISM®) Services Business Survey Committee.
The Business Activity Index registered 55.9% in March, 1.5 pp higher than the 54.4% recorded in February. This is the index’s 58th consecutive month of expansion. The Supplier Deliveries Index registered 50.6%, 2.8 pp lower than the 53.4% recorded in February. This is the fourth consecutive month the index has been in expansion territory, indicating slower supplier delivery performance. (A reading of below 50% indicates faster deliveries). The Prices Index registered 60.9% in March, a 1.7-percentage point decrease from February’s reading of 62.6%, a fourth consecutive reading above 60%. Respondents commented: ““We’re expecting price increases in the near future due to tariffs on several commodity-based contracts, including waterworks items.” (Utilities).
The Inventories Index remained in expansion territory for the second month in a row. The reading of 50.3% is a 0.3-percentage point decrease compared to the 50.6% reported in February. The Employment Index dropped into contraction territory for its first time in six months; the reading of 46.2% is a 7.7-percentage point decrease compared to the 53.9% recorded in February Respondents commented: “We are seeing some loosening in the U.S. economy related to hiring and people retention. Quality candidates are available, and employee turnover is decreasing. Competitive pressure for goods and services is increasing as suppliers seek organic increases in revenue.” (Professional, Scientific & Technical Services).
The Inventory Sentiment Index grew for the 23rd consecutive month in March. The index registered 56.6%, an increase of 1.9 pp from February’s figure of 54.7%. This reading indicates that respondents feel their inventories are too high when correlated to business requirements.
Read the ISM release.
