Latest ISM Report: Signs of Hope in the Services Sector

By at 6 August, 2020, 8:34 am

by Raymond J. Keating-

After two reports came out on August 5 indicating that manufacturing showed some life in July, including the Institute for Supply Management’s report on the manufacturing sector, ISM’s report on the services sector also pointed to recovery continuing in July.

The ISM services index, as noted in the report, “registered 58.1 percent, 1 percentage point higher than June’s figure of 57.1 percent. The reading indicates the services sector grew for the second consecutive month after two months of contraction and 122 months of growth before that. A reading above 50 percent indicates the services sector economy is generally expanding; below 50 percent indicates the services sector is generally contracting.”

It also was pointed out that a reading “above 48.5 percent, over time, generally indicates an expansion of the overall economy.”

Anthony Nieves, chairman of the Institute for Supply Management Services Business Survey Committee, pointed out, “Respondents remain concerned about the pandemic; however, they are mostly optimistic about business conditions and the economy as businesses continue to reopen. Sentiment varies across industries, as they are impacted differently.”

Indeed, given the central uncertainty of the pandemic, it’s worth highlighting that, according to a visit to the Johns Hopkins Coronavirus site on the morning of August 5, the number of confirmed cases in the U.S. topped 4.7 million, with 156,874 deaths. And projections remain sobering for the coming weeks (see, for example, projections here and here).

Let’s hope that the business optimism mentioned by Nieves proves to be hold up, and becomes more widespread, especially among hard-hit small businesses. The surest path to improved confidence, of course, will come with effective vaccines and therapeutics reaching the market.

Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.



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