#United States #Economic Growth #Tempe #Services PMI #Employment Trends

Services PMI® Report Highlights: March 2025

In March 2025, the Services PMI® reported a value of 50.8%, reflecting sustained growth in the services sector for the ninth month in a row. This figure, despite being lower than February's reading of 53.5%, showcases the resilience of the U.S. economy as it continues its recovery journey following the impacts of the pandemic.

Economic Activity Overview

According to the latest report by the Institute for Supply Management (ISM), the expansion of economic activity in the services sector remains noteworthy, particularly given that this marks the 55th time in the last 58 months that the Services PMI® has indicated positive growth since the recovery took root in June 2020. The Business Activity Index rose slightly to 55.9%, indicating that businesses are continuing to operate effectively despite economic headwinds.

Conversely, the New Orders Index, a critical measure of future activity, slipped to 50.4%, down from 52.2% in February. This decline underscores a slowing demand in new orders, which could be indicative of market uncertainty among consumers and businesses alike. Employment figures also experienced a notable contraction, with the Employment Index falling to 46.2%, suggesting that employers are becoming cautious in their hiring approaches.

The Supplier Deliveries Index registered at 50.6%, indicating a slowdown in the performance of supplier deliveries. It’s important to note that this index operates inversely, meaning an index above 50% signifies slower deliveries, which is common during economic upturns as customer demand rises.

The Impact of Prices

The Prices Index remained elevated at 60.9%, although it too saw a decline from February’s reading of 62.6%. This sustained increase in prices highlights ongoing inflationary pressures within the services industry. The data indicates a significant number of industries are still grappling with increased costs, primarily driven by tariff activities and supply chain disruptions.

Sector Performance Overview

Ten service industries reported growth in March, albeit a decrease from the 14 industries recording growth in the previous months. Leading the sectors were Accommodation & Food Services, Transportation & Warehousing, and Finance & Insurance. On the flip side, industries such as Management of Companies & Support Services and Professional, Scientific, & Technical Services faced contractions.

As noted in comments from industry respondents:

• - Accommodation & Food Services: “Sales have improved, signaling an optimistic trend for the coming months despite concerns around the economy.”
• - Construction: “Inflation pressures from aluminum tariffs will impact costs moving forward.”
• - Health Care & Social Assistance: “Patient volumes are exceeding forecasts, leading to improved revenues.”

Looking Ahead

Steve Miller, Chair of the ISM Services Business Survey Committee, emphasizes that while the slight drop in several indexes is noteworthy, the fundamentals of growth remain intact. The balance of sentiment among industry leaders indicates that while some anticipate challenges—including ongoing concerns over tariffs and governmental spending—there's also an optimistic outlook for the quarter ahead.

In summary, the March 2025 Services PMI reflects a mixed bag of advancement in the services sector, with certain indexes signaling caution. As businesses navigate these complexities, the resilience demonstrated within several industries speaks to a broader trend of recovery within the U.S. economy. Continued monitoring of these figures will be essential for understanding how the economy adapts to these evolving conditions.