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US Services PMI Declines in November As Sector Struggles with COVID-19

Jay Brahach December 3, 2020

The US Institute for Supply Management (ISM) Services Purchasing Managers Index declined 0.7 percentage points in November, measuring in at 55.9, in line with market expectations, but the trade-weighted dollar index (DXY) declined slightly in the aftermath of this result.

The index had already notched a considerable decline before the PMI data were released, and was down about 0.7% in late morning trading as investors shifted from safe havens such as the US dollar to more risk-sensitive assets.

While the pace of expansion slowed, November represents the sixth consecutive month of growth in the services sector. Looking at the historical relationship between the Services PMI and real GDP, a reading of 55.9 would correspond to a 2.5% increase in GDP annually.

The Supplier Deliveries Index measured 57.0, up from 56.2 in October. An increase in this sub-index corresponds to an overall slowdown of delivery times for goods. As customer demand increases, it is generally expected that deliveries will become slower, and an increase in this sub-index is deemed positive because of this.

The ISM Services Employment Index increased 1.4% from October, as employment grew for the third consecutive month. Correspondents cited COVID-19 as a leading cause for employment turnover as companies are having to overstaff in order to accommodate for individuals having to quarantine.

Looking at the report as a whole, it does seem the US economy is continuing to fight through the pandemic. New Export Orders grew overall for the fourth month in a row, while imports were up 2.5 percentage points. However, as the US reports numbers of over 100,000 in hospital for the first time, the coronavirus will continue to be a hindrance to economic activity.

Those within Accommodation & Food services have cited problems navigating COVID regulations, and the Education sector is pausing plans for re-opening in response to record infection rates across the country.

This is going to be a very different December than we’re used to. While the US economy has struggled to remain open, the pandemic inevitably creates difficulties which cannot be avoided, and the services sector is clearly battling this firsthand.

 

Jay Brahach

Account Executive & Currency Analyst

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