Bidenflation And Broken Supply Chains Afflicted The Services Sector in November

U.S. President Joe Biden listens during the first North American Leaders’ Summit (NALS) since 2016 in the East Room at the White House November 18, 2021 in Washington, DC. (Alex Wong/Getty Images)
Alex Wong/Getty Images

The services sector is under severe stress from inflation and supply chain disarray, data from an industry survey showed Friday.

The Institute for Supply Management said Friday that the deliveries component of its purchase manager index for the services sector registered 75.7 for the second consecutive month. That is the second highest reading on record. The highest was April 2020, when many businesses were temporarily shutdown altogether. A higher reading on the index indicates slower deliveries.

Perhaps counter-intuitively, slower deliveries actually count as a positive contribution to the ISM’s overall PMI reading. That’s because longer-delivery times can be an indication of strong demand for services. In November, the overall reading rose to 69.1, far exceeding even the top of the range of estimates. The consensus forecast was for a reading of 65, which would have been a bit below October’s reading.

The Backlog of Orders Index registered 65.9 percent, 1.4 percentage points lower than October’s all-time high reading of 67.3 percent. That is also likely an indication of supply chain problems that pushes up the overall PMI score.

The Prices Index reached its third-highest reading ever at 82.3 percent, down 0.6 percentage point from the October figure. All 18 services industries reported an increase in prices paid during the month of November. Inflation too pushes up the index.

Nearly all commodities used by the services sector were up in price, with the exception of latex gloves and lumber.

Services businesses continue to struggle replenishing inventories, as the inventory and inventory sentiment gauges stayed in contraction or ‘too low’ territory in November, according to ISM.

In short, although demand remains strong, the record high score for November’s PMI is also a reflection of inflation and supply chain problems for the services sector.

 

 

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