Service sector

Economic report of construction and service sector at record high

  • Economic indicators for industries such as construction are showing a “record high”.
  • Construction was the fifth fastest growing sector in the report.
  • “Demand for residential new home construction continues to outpace supply.”
  • Construction companies reported the highest price increases for materials and services in March among 18 service industries.

“All-time high” was the buzzword at a monthly economic report meeting for sectors including construction, leasing, warehousing and others. Anthony Nieves, chair of the Institute of Supply Management’s (ISM) Services Business Survey Committee, presented the March services sector report on April 5. The PMI, or Purchasing Managers Index, is a set of economic indicators based on company surveys in the sector.

“The services PMI came in at a record high of 63.7%, 8.4 percentage points higher than February’s reading of 55.3%,” Nieves said. “The previous high was in October 2018, when the services PMI recorded 60.9%. The March reading marks the 10th consecutive month of growth for the services sector, which has expanded for all but two of the past 134 months.

According to the March report, the services PMI registered 63.7%, an increase of 8.4 percentage points from the February figure of 55.3%. This reading indicates that the services sector rose for the 10th consecutive month after two months of contraction and 122 months of growth before that. A reading above 50% indicates that the service sector economy is generally expanding; below 50% indicates that the service sector is generally contracting.

Construction was the fifth fastest growing sector in the report. All 18 service industries with growth in March: arts, entertainment and recreation; wholesale trade; mining; business management and support services; construction; agriculture, forestry, fishing and hunting; accommodation and catering services; real estate, rental and leasing; transport and storage; public administration; finance and insurance; public services ; health care and social assistance; professional, scientific and technical services; information; retail business; educational services; and other services.

ISM

A services PMI above 49%, over time, generally indicates an expansion of the overall economy. The March services PMI points to expansion for a 10th consecutive month after two months of contraction and a previous period of 127 months of growth. The March PMI of 63.7% corresponds to a 5.1% increase in real gross domestic product (GDP) on an annualized basis, Nieves said.

Business Activity Reports Highest Rating

The ISM’s business activity index recorded its highest level since its inception in 1997. The index hit a record high of 69.4% in March, an increase of 13.9 percentage points from compared to the February reading of 55.5%. This represents growth for the 10th consecutive month.

April Business Services Pmi ChartISM

“We believe some pent-up demand is starting to return as back orders and production increase following COVID-19 delays; we also think there is buying optimism due to the recent stimulus package,” said one survey respondent.

The top performing industries for business activity in March, in order of performance, include: arts, entertainment and recreation; mining; business management and support services; accommodation and catering services; wholesale trade; agriculture, forestry, fishing and hunting; real estate, rental and leasing; public services ; finance and insurance; public administration; transport and storage; health care and social assistance; construction; information; retail business; educational services; and professional, scientific and technical services.

Logistics/shipping delays

Nieves says many service industries are reporting slow deliveries and resulting price increases on raw materials and other goods.

The supplier shipments index registered 61%, up 0.2 percentage points from February’s reading of 60.8%; a reading above 50% indicates slower deliveries, which is typical as the economy improves and customer demand increases, he says.

“Demand for residential new home construction continues to outpace supply,” a survey respondent said in the report. “Delays, interruptions and shortages of building materials are starting to develop. Shipping delays at the ports of Los Angeles and Long Beach contributed to longer delays. The cold weather in Texas has hurt several component makers for building materials. We have encountered the “perfect storm” for building material shortages and price increases. »

Other respondents said: “Logistical challenges, port delays, shipping delays, [and lower] availability of parts” and “It is still difficult to find trucks for loads and to secure shipping containers”.

A respondent to the mining industry survey said, “The lack of chemicals and the recent freeze in Texas has delayed some orders and is creating a micro [price] increases for certain products. Suppliers are using the short-term shortage to their advantage to raise prices.

General rise in prices

Nieves also pointed out today that many survey respondents said they were experiencing price increases due to shipping and logistics delays.

“The Price Index figure of 74% is 2.2 percentage points higher than February’s reading of 71.8%, indicating that prices rose in March, and at a faster pace” , he said.

Construction companies reported the highest price increases for materials and services in March among 18 service industries. Other industries reporting price increases, in order of increase, include: construction; wholesale trade; public services ; mining; real estate, rental and leasing; business management and support services; public administration; retail business; transport and storage; finance and insurance; other services; accommodation and catering services; agriculture, forestry, fishing and hunting; health care and social assistance; arts, entertainment and recreation; professional, scientific and technical services; educational services; and information.

Nieves says the issue of delivery slowdowns and price increases, while important to these industries, is not serious.

“These businesses are resilient,” he says. “We always have access to essential items.”

Building materials and services are at the top of the list when it comes to price increases. Products that have increased in price include: chemicals; Construction materials; building services; copper products; diesel; electrical components; examination gloves; food and drink; cargo; fuel; gasoline; gasoline related products; labor; work – building; temporary employment; lumber; oriented strand board; packaging materials; paint related products; individual protection equipment; PPE – gloves; polyproducts; polyvinyl chloride (PVC) products; resin products; steel; steel conduit; steel products; steel – rolled; trucking services and wood products.

Employment figures on the rise

All but three sectors – utilities, information and health care – recorded employment increases in March. Hiring increased in March for the third consecutive month after contracting in December. After 72 consecutive months of expansion before the pandemic, the index contracted from March to September. ISM®The services employment index recorded 57.2% in March, up 4.5 percentage points from February’s reading of 52%.

April employment chartISM

The 10 industries reporting an increase in employment in March, listed in order, are: arts, entertainment and recreation; business management and support services; wholesale trade; construction; finance and insurance; other services; accommodation and catering services; public administration; educational services; and professional, scientific and technical services.