Economic activity in the services sector grew in November for the 18th month in a row — with the Services PMI setting a record for the fifth time in 2021 — say the nation’s purchasing and supply executives in the latest Services ISM Report on Business.
The report was issued Dec. 3 by Anthony Nieves, chair of the Institute for Supply Management (ISM) Services Business Survey Committee. The ISM Services PMI index is a set of economic indicators based off surveys of private-sector companies in the services sector, which includes construction.
In November, the Services PMI registered 69.1%, the highest reading since the inception of the index in 2008. The 12-month average is 62.1%, which reflects strong and sustained demand in the services sector, according to the report.
The November reading indicates the services sector grew for the 18th consecutive month after two months of contraction and 122 months of growth before that. A reading above 50% indicates the services sector economy is generally expanding; below 50% indicates the services sector is generally contracting. 
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“In November, the Services PMI registered another all-time high of 69.1%, 2.4 percentage points above October’s reading of 66.7 %, the former all-time high,” Nieves says. “Previous records were set in March (63.7%), May (64%) and July (64.1%). The data quickly explains the elevated Services PMI reading, as two of the four equally weighted subindexes that directly factor into the composite index set or tied all-time highs.
The Business Activity Index reached 74.6%, an increase of 4.8 percentage points compared to the reading of 69.8% in October, and the New Orders Index registered 69.7%, the same reading as last month’s figure. The other two subindexes are Employment and Supplier Deliveries; both also contributed positively to the Services PMI in November.
“Construction material shortages and longer lead times continue to hamper operations. Significant cost increases from labor and freight are forecast for the start of next year,” a survey respondent in the construction sector reports.
The Supplier Deliveries Index registered 75.7%, the same reading as in October. The all-time high is 78.3%, recorded in April 2020. Supplier Deliveries is the only ISM Report on Business index that is inversed; a reading of above 50% indicates slower deliveries, which is typical as the economy improves and customer demand increases.
“Demand continues to be strong, reflected by two other subindexes in November. The Backlog of Orders Index registered 65.9%, 1.4 percentage points lower than October’s all-time high reading of 67.3%,” Nieves says. “The Prices Index reached its third-highest reading ever at 82.3%, down 0.6 percentage point from the October figure of 82.9%. Services businesses continue to struggle replenishing inventories, as the Inventories Index (48.2%, up 6 percentage points from October’s reading of 42.2%) and the Inventory Sentiment Index (an all-time low of 36.4%, down 0.9 percentage point from the previous month’s figure of 37.3%) stayed in contraction or ‘too low’ territory in November.”
All 18 services industries reported growth. The composite index indicated growth for the 18th consecutive month after a two-month contraction in April and May 2020. In November, record growth continued for the services sector, which has expanded for all but two of the last 142 months. Demand continues to outpace supply that has been impacted by capacity constraints, shortages of labor and materials, and logistical challenges. This has also caused demand-pull inflation that is affecting overall business conditions.”
Industry Performance
All 18 services industries reporting growth in November, listed in order, are: real estate, rental and leasing; transportation and warehousing; retail trade; agriculture, forestry, fishing and hunting; management of companies and support services; utilities; wholesale trade; mining; public administration; construction; health care and social assistance; arts, entertainment and recreation; other services; professional, scientific and technical services; finance and insurance; information; educational services; and accommodation and food services. No industries are reporting contraction in November.
Commodities
The following commodities are up in price (the number of consecutive months the commodity is listed is indicated after each item): aluminum (5); bacon; beef (3); bread; chemicals (3); chicken (3); chlorine; computers and peripherals; construction contractors (5); copy paper; diesel fuel (12); electrical components (10); electronics (3); freight (7); fuel (11); gasoline (12); gloves; labor (12); labor - construction (4); labor - technical; labor - temporary (11); natural gas (2); packaging; paper; pipette tips; plastic products (4); polyvinyl chloride (PVC) products (3); professional services; raw materials; software maintenance and support (2); steel (2); steel products (11); and transportation costs (2).
Commodities down in price include exam gloves and lumber (5). 
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Commodities in short supply include: blood collection tubes (3); computer equipment (4); construction contractors (3); construction materials; construction subcontractors (4); copper; crutches (2); electrical components (3); engine components; labor (4); labor - construction; laptops and desktop computers (4); paper products (2); plastic pipe fittings; pipette tips (9); plastic pipe (2); plastic pipe fittings; plastic products; polyvinyl chloride (PVC); steel products (3); and suction canisters.
Business Activity
ISM’s Business Activity Index registered another all-time high of 74.6% in November, an increase of 4.8 percentage points over the previous mark of 69.8% in October, indicating growth for the 18th consecutive month. Comments from respondents include: “Order levels have increased, and we are learning to work with the randomly dynamic increasing lead times” and “Historical demand trend.”
The 16 industries reporting an increase in business activity for the month of November, listed in order, are: management of companies and support services; retail trade; real estate, rental and leasing; transportation and warehousing; wholesale trade; health care and social assistance; utilities; public administration; agriculture, forestry, fishing and hunting; other services; construction; finance and insurance; information; mining; professional, scientific and technical services; and educational services. No industry reported a decrease in November compared to October.
New Orders
ISM’s New Orders Index registered a record 69.7%, the same as the all-time high reading in October. New orders grew for the 18th consecutive month after two months of contraction and a preceding period of 128 months of expansion. Comments from respondents include: “Economic situation is getting better and supply chain is improving” and “Supply chain issues are creating anxiety in the marketplace, and clients are doing just-in-case buying instead of just-in-time.”
All 18 industries reported growth of new orders in November, in this order: transportation and warehousing; retail trade; management of companies and support services; construction; wholesale trade; mining; health care and social assistance; public administration; agriculture, forestry, fishing and hunting; arts, entertainment and recreation; other services; real estate, rental and leasing; utilities; finance and insurance; professional, scientific and technical services; accommodation and food services; information; and educational services.
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Employment
Employment activity in the services sector grew in November for the fifth consecutive month after contracting in June. ISM’s Services Employment Index registered 56.5% in November, up 4.9 percentage points from the October reading of 51.6%.
Comments from respondents include: “People are quitting to get paid more at different occupations” and “Increased business activity and customer demand requires more human resources.”
The 11 industries reporting an increase in employment in November, listed in order, are: arts, entertainment and recreation; retail trade; mining; agriculture, forestry, fishing and hunting; real estate, rental and leasing; transportation and warehousing; wholesale trade; utilities; finance and insurance; educational services; and professional, scientific and technical services. The four industries that reported a reduction in employment in November are: management of companies and support services; accommodation and food services; health care and social assistance; and construction.
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Inventories
The Inventories Index contracted in November for the sixth consecutive month. The reading of 48.2% was a 6-percentage point increase from the 42.2% reported in October. Of the total respondents in November, 37% indicated they do not have inventories or do not measure them. Comments from respondents include: “Longer lead times affecting safety stock” and “Utilizing current inventories with slower replacements due to logistical challenges.”
The seven industries reporting an increase in inventories in November, listed in order, are: arts, entertainment and recreation; finance and insurance; accommodation and food services; public administration; construction; health care and social assistance; and utilities. The nine industries reporting a decrease in inventories in November, listed in order, are: real estate, rental and leasing; mining; agriculture, forestry, fishing and hunting; professional, scientific and technical services; retail trade; transportation and warehousing; educational services; information; and wholesale trade.
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Prices
Prices paid by services organizations for materials and services increased in November, with the index registering 82.3%, 0.6 percentage point lower than October’s reading of 82.9%. This is the third-highest reading since September 2005, when the index reached its all-time high of 83.5%.
All 18 services industries reported an increase in prices paid during the month of November, in the following order: mining; transportation and warehousing; accommodation and food services; utilities; management of companies and support services; construction; public administration; arts, entertainment and recreation; real estate, rental and leasing; wholesale trade; educational services; retail trade; health care and social assistance; information; finance and insurance; professional, scientific and technical services; agriculture, forestry, fishing and hunting; and other services.
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Backlog of Orders
The ISM Services Backlog of Orders Index grew in November for the 17th time in the last 18 months. The index registered 65.9%, a 1.4-percentage point decrease compared to last month’s record reading of 67.3%. The previous all-time high was 65.8%, set in June. Of the total respondents in November, 38% indicated they do not measure backlog of orders.
The 13 industries reporting an increase in order backlogs in November, listed in order, are: accommodation and food services; transportation and warehousing; agriculture, forestry, fishing and hunting; management of companies and support services; real estate, rental and leasing; retail trade; utilities; health care and social assistance; construction; wholesale trade; public administration; professional, scientific and technical services; and educational services. The two industries that reported a decrease in backlogs in November are: arts, entertainment and recreation; and mining.
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New Export Orders
Orders and requests for services and other non-manufacturing activities to be provided outside of the U.S. by domestically based companies grew in November for the 10th consecutive month. The New Export Orders Index registered 57.9%, 4.4 percentage points lower than the 62.3% reported in October. Of the total respondents in November, 79% indicated they either do not perform, or do not separately measure, orders for work outside of the U.S.
The four industries reporting an increase in new export orders in November are: real estate, rental and leasing; transportation and warehousing; wholesale trade; and health care and social assistance. the three industries reporting a decrease in new export orders in November are educational services; information; and finance and insurance.
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Inventory Sentiment
The ISM Services Inventory Sentiment Index contracted in November for the eighth consecutive month, registering an all-time low of 36.4%, a 0.9 percentage point decrease from October’s figure of 37.3%. The previous record low of 37.2% was recorded in June 2021. This indicates that respondents feel their inventories are too low when correlated to business activity levels.
The six industries reporting sentiment that their inventories were too high in November, listed in order, are: arts, entertainment and recreation; mining; finance and insurance; utilities; accommodation and food services; and health care and social assistance. The eight industries reporting a feeling that their inventories were too low in November, listed in order, are: real estate, rental and leasing; retail trade; transportation and warehousing; professional, scientific and technical services; public administration; educational services; wholesale trade; and information.
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Supplier Deliveries
The Supplier Deliveries Index registered 75.7%, the same figure as in October. For a second straight month, the index posted its second-highest reading, exceeded only by the record 78.3% registered in April 2020. A reading above 50% indicates slower deliveries, while a reading below 50% indicates faster deliveries.
Comments from respondents include: “Shortages of raw materials (and) of delivery drivers” and “Longer lead times for transportation.”
The 17 industries reporting slower deliveries in November, listed in order, are: real estate, rental and leasing; accommodation and food services; agriculture, forestry, fishing and hunting; construction; utilities; public administration; health care and social assistance; management of companies and support services; educational services; transportation and warehousing; retail trade; mining; wholesale trade; information; professional, scientific and technical services; other services; and finance and insurance. No industries reported faster supplier deliveries in November.
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Imports
The Imports Index grew in November for the second consecutive month, as it registered 50.5%, 2.8 percentage points lower than October’s figure of 53.3%. Sixty-four percent of respondents reported that they do not use, or do not track the use of, imported materials.
The five industries reporting an increase in imports for the month of November are: management of companies and support services; wholesale trade; educational services; utilities; and health care and social assistance. The four industries reporting a decrease in imports in November are: real estate, rental and leasing; retail trade; information; and accommodation and food services. Nine industries reported no change in imports in November.
