U.S. Services Sector Expands in November Despite Slower Growth

Economic activity in the U.S. services sector expanded for the fifth consecutive month in November, according to the latest Services ISM® Report on Business®. The Services PMI® registered 52.1%, reflecting overall growth for the 51st time in the 54 months since the recovery from the COVID-19 pandemic recession began in June 2020.

Economic activity in the U.S. services sector expanded for the fifth consecutive month in November, according to the latest Services ISM® Report on Business®. The Services PMI® registered 52.1%, reflecting overall growth for the 51st time in the 54 months since the recovery from the COVID-19 pandemic recession began in June 2020.

Steve Miller, CPSM, CSCP, Chair of the Institute for Supply Management® (ISM®) Services Business Survey Committee, stated, “In November, the Services PMI® stood at 52.1%, down 3.9 percentage points from October’s 56%. This marks the ninth time this year the composite index has been in expansion territory.”

Key Subindexes Reflect Slower Growth

The report highlighted slower growth across major subindexes:

• Business Activity Index: Recorded 53.7%, a decrease of 3.5 percentage points from October’s 57.2%, marking the fifth month of expansion following a contraction in June.
• New Orders Index: Also at 53.7%, down 3.7 percentage points from October’s 57.4%, but with 13 industries reporting growth, an improvement from October.
• Employment Index: Registered 51.5%, indicating expansion for the fourth time in five months, though it declined by 1.5 percentage points from October’s 53%.

Supply Chain and Pricing Trends

• Supplier Deliveries Index: Fell to 49.5%, down 6.9 percentage points from October’s 56.4%, signaling faster delivery times. This was the sixth instance in 2024 where the index indicated contraction.
• Prices Index: Rose slightly to 58.2%, up by 0.1 percentage points from October, reflecting continued inflationary pressures.
• Inventories Index: Contracted sharply, registering 45.9%, down 11.3 percentage points from October’s 57.2%. Conversely, the Inventory Sentiment Index rose to 54.6%, expanding for the 19th consecutive month.

Backlog and Industry Performance

The Backlog of Orders Index remained in contraction at 47.1%, a slight decrease from October’s 47.7%, marking the fourth consecutive month of declining backlogs. Despite this, 14 industries reported growth in business activity, matching October’s total, and reinforcing optimism in the services sector.

Outlook and Sector Insights

Miller added, “The decline in the Services PMI® in November was driven by decreases in all four key subindexes: Business Activity, New Orders, Employment, and Supplier Deliveries. However, the continued growth in business activity and new orders across most industries suggests sustained expansion in the sector.”

Respondents reported mixed sentiments, with seasonality playing a significant role. Concerns about elections, tariffs, and their potential impacts were frequently mentioned, underscoring a cautious but generally positive outlook.

The services sector has expanded in 21 of the past 23 months, and November’s reading of 52.1% is just 0.2 percentage points below the 2024 average of 52.3%.