Services PMI® at 50.8%; March 2025 Services ISM® Report On Business®

Business Activity Index at 55.9%; New Orders Index at 50.4%; Employment Index at 46.2%; Supplier Deliveries Index at 50.6%

TEMPE, Ariz., April 3, 2025 -- Economic activity in the services sector expanded for the ninth consecutive month in March, say the nation's purchasing and supply executives in the latest Services ISM^® Report On Business^®. The Services PMI^® registered 50.8 percent, indicating expansion for the 55th time in 58 months since recovery from the coronavirus pandemic-induced recession began in June 2020.

The report was issued today by Steve Miller, CPSM, CSCP, Chair of the Institute for Supply Management^® (ISM^®) Services Business Survey Committee: "In March, the Services PMI^® registered 50.8 percent, 2.7 percentage points lower than the February figure of 53.5 percent. The Business Activity Index registered 55.9 percent in March, 1.5 percentage points higher than the 54.4 percent recorded in February. This is the index's 58th consecutive month of expansion. The New Orders Index recorded a reading of 50.4 percent in March, 1.8 percentage points lower than the February figure of 52.2 percent. The Employment Index dropped into contraction territory for its first time in six months; the reading of 46.2 percent is a 7.7-percentage point decrease compared to the 53.9 percent recorded in February.

"The Supplier Deliveries Index registered 50.6 percent, 2.8 percentage points lower than the 53.4 percent recorded in February. This is the fourth consecutive month the index has been in expansion territory, indicating slower supplier delivery performance. (Supplier Deliveries is the only ISM^® Report On Business^® index that is inversed; a reading of above 50 percent indicates slower deliveries, which is typical as the economy improves and customer demand increases.)

"The Prices Index registered 60.9 percent in March, a 1.7-percentage point decrease from February's reading of 62.6 percent, a fourth consecutive reading above 60 percent. The Inventories Index registered its second consecutive month in expansion territory in March, registering 50.3 percent, a decrease of 0.3 percentage point from February's figure of 50.6 percent. The Inventory Sentiment Index expanded for the 23rd consecutive month, registering 56.6 percent, up 1.9 percentage points from February's reading of 54.7 percent. The Backlog of Orders Index registered 47.4 percent in March, a 4.3-percentage point decrease from the February figure of 51.7 percent, indicating contraction for the seventh time in the last eight months dating back to August.

"Ten industries reported growth in March, a drop of four from the 14 industries reported in each of the previous two months. The Services PMI^® has expanded in 55 of the last 58 months dating back to June 2020. The March reading of 50.8 percent is 2.7 percentage points below the February reading of 53.5 percent, and it is the lowest Services PMI^® reading since June 2024 (49.2 percent)."

Miller continues, "March saw drops in the readings of three (New Orders, Employment and Supplier Deliveries) of the four subindexes that directly factor into the Services PMI^®. Only Business Activity saw an increase over February's reading. Employment was the only one of these subindexes to drop into contraction territory after three straight months with all four in expansion. There has been a significant increase this month in the number of respondents reporting cost increases due to tariff activity. Despite an increase in comments on tariff impacts and continuing concerns over potential tariffs and declining governmental spending, there was a close balance in near-term sentiment, between panelists with good outlooks and those seeing or expecting declines."

INDUSTRY PERFORMANCE
The 10 services industries reporting growth in March — listed in order — are: Accommodation & Food Services; Transportation & Warehousing; Finance & Insurance; Wholesale Trade; Public Administration; Utilities; Agriculture, Forestry, Fishing & Hunting; Construction; Real Estate, Rental & Leasing; and Retail Trade. The seven industries reporting a contraction in the month of March — listed in order — are: Management of Companies & Support Services; Professional, Scientific & Technical Services; Other Services; Arts, Entertainment & Recreation; Educational Services; Health Care & Social Assistance; and Information.

WHAT RESPONDENTS ARE SAYING

• "Restaurant sales and traffic have improved in the past month overall. Valentine's Day typically starts an improved seasonal trend that was consistent this year. We remain optimistic about the coming months, despite recent news of possible recession and tariffs that have not played out yet." [Accommodation & Food Services]
• "Starting to see effect of aluminum tariff. These costs will be passed on to customers." [Construction]
• "Patient volumes continue to exceed forecast, leading to increased revenues and an improved financial outlook. Supply chains continue to operate effectively and few categories — including IV solutions — are showing signs of duress. Labor outlook is improving, with reliance on travel staff continuing to recede. Outlook for the duration of the quarter is favorable." [Health Care & Social Assistance]
• "The tariffs have caused issues in the groundwood paper market especially. With a large amount of groundwood imported from Canada to the U.S., the tariffs and resulting delays have caused havoc with the supply chain and deliveries. U.S. mills are getting backlogged and late from the additional tonnage they've taken on." [Information]
• "New equipment purchases have slowed down over the last month due to the uncertainty of the new administration and cancellation of certain aspects of the Inflation Reduction Act." [Other Services]
• "We are seeing some loosening in the U.S. economy related to hiring and people retention. Quality candidates are available, and employee turnover is decreasing. Competitive pressure for goods and services is increasing as suppliers seek organic increases in revenue." [Professional, Scientific & Technical Services]
• "Government budget cuts and layoffs are negatively impacting our operations." [Public Administration]
• "We are still holding back some money for emergency use in case the new administration targets grant usage and puts a hold on current spending." [Transportation & Warehousing]
• "We're expecting price increases in the near future due to tariffs on several commodity-based contracts, including waterworks items." [Utilities]
• "Tariff confusion and the variety of ways that suppliers are responding have had a strong effect on our purchasing decisions this month, causing us to shift spend and in some cases buy in advance of reported tariffs." [Wholesale Trade]

Services ISM^® Report On Business^® data is seasonally adjusted for the Business Activity, New Orders, Employment and Prices indexes. Manufacturing ISM^® Report On Business^® data is seasonally adjusted for New Orders, Production, Employment and Inventories indexes.
*Number of months moving in current direction.

COMMODITIES REPORTED UP/DOWN IN PRICE, AND IN SHORT SUPPLY

Commodities Up in Price
Aluminum Products (2); Copper Based Products; Dairy; Diesel Fuel* (4); Heating, Ventilation and Air Conditioning (HVAC) Equipment; Labor (52); Lumber (7); Software Maintenance and Support; Steel; and Steel Products (3).

Commodities Down in Price
Diesel Fuel*; Oil and Related Products, and Unleaded Gasoline.

Commodities in Short Supply
Eggs (2); and Labor (2).

Note: The number of consecutive months the commodity is listed is indicated after each item.
*Indicates both up and down in price.

MARCH 2025 SERVICES INDEX SUMMARIES

Services PMI^®
In March, the Services PMI^® registered 50.8 percent, a 2.7-percentage point decrease compared to the February reading of 53.5 percent. A reading above 50 percent indicates the services sector economy is generally expanding; below 50 percent indicates it is generally contracting.

A Services PMI^® above 48.6 percent, over time, generally indicates an expansion of the overall economy. Therefore, the March Services PMI^® indicates the overall economy is expanding for the 58th straight month. Miller says, "The past relationship between the Services PMI^® and the overall economy indicates that the Services PMI^® for March (50.8 percent) corresponds to a 0.7-percentage point increase in real gross domestic product (GDP) on an annualized basis."

SERVICES PMI^® HISTORY

Business Activity
ISM^®'s Business Activity Index registered 55.9 percent in March, 1.5 percentage points higher than the 54.4 percent recorded in February, a 58th straight month of expansion. The Business Activity Index has been in expansion territory since its coronavirus pandemic lows. Comments from respondents include: "Loading inventory on Canadian ingredients ahead of potential tariffs" and "Budget constraints and temporary budget freezes have slowed several major projects."

The 12 industries reporting an increase in business activity for the month of March — listed in order — are: Accommodation & Food Services; Transportation & Warehousing; Real Estate, Rental & Leasing; Finance & Insurance; Wholesale Trade; Retail Trade; Public Administration; Agriculture, Forestry, Fishing & Hunting; Utilities; Educational Services; Health Care & Social Assistance; and Construction. The three industries reporting a decrease in business activity for the month of March are: Management of Companies & Support Services; Arts, Entertainment & Recreation; and Professional, Scientific & Technical Services.

New Orders
ISM^®'s New Orders Index registered 50.4 percent in March, 1.8 percentage points lower than the reading of 52.2 percent in February. The index was in expansion for the ninth consecutive month after contracting in June for just the second time since May 2020. Comments from respondents include: "Increased sales associated with lower mortgage rates" and "New capital projects are on hold."

The nine industries reporting an increase in new orders for the month of March — listed in order — are: Transportation & Warehousing; Wholesale Trade; Utilities; Accommodation & Food Services; Finance & Insurance; Public Administration; Retail Trade; Information; and Health Care & Social Assistance. The four industries reporting a decrease in new orders for the month of March are: Professional, Scientific & Technical Services; Real Estate, Rental & Leasing; Management of Companies & Support Services; and Educational Services.

Employment
Employment activity in the services sector contracted in March for the first time since September 2024. The Employment Index registered 46.2 percent, down 7.7 percentage points from the February figure of 53.9 percent. Comments from respondents include: "Have been able to hire high-quality employees to fill open positions" and "Conservative view of the job market and economy; not adding head count or resources."

The four industries reporting an increase in employment in March are: Construction; Accommodation & Food Services; Public Administration; and Finance & Insurance. The 10 industries reporting a decrease in employment in March — listed in order — are: Other Services; Management of Companies & Support Services; Educational Services; Professional, Scientific & Technical Services; Information; Wholesale Trade; Transportation & Warehousing; Retail Trade; Health Care & Social Assistance; and Utilities.

Supplier Deliveries
In March, the Supplier Deliveries Index indicated slower supplier performance for the fourth month in a row. The index registered 50.6 percent, down 2.8 percentage points from the 53.4 percent recorded in February. A reading above 50 percent indicates slower deliveries, while a reading below 50 percent indicates faster deliveries. Comments from respondents include: "Capacity in certain transportation modes is allowing for faster/shorter lead times" and "Steel conduit lead times have increased due to factories unable to keep up with demand."

The six industries reporting slower deliveries in March — in the following order — are: Management of Companies & Support Services; Wholesale Trade; Professional, Scientific & Technical Services; Finance & Insurance; Information; and Utilities. The six industries reporting faster supplier deliveries for the month of March — in the following order are: Transportation & Warehousing; Retail Trade; Construction; Educational Services; Health Care & Social Assistance; and Public Administration. Six industries reported no change in supplier deliveries.

Inventories
The Inventories Index remained in expansion territory for the second month in a row. The reading of 50.3 percent is a 0.3-percentage point decrease compared to the 50.6 percent reported in February. Of the total respondents in March, 48 percent indicated they do not have inventories or do not measure them. Comments from respondents include: "Upper respiratory infections consuming inventory faster than we can replenish" and "Ordering extra of some commodities in anticipation of price increases."

The 10 industries reporting an increase in inventories in March — in the following order — are: Accommodation & Food Services; Arts, Entertainment & Recreation; Public Administration; Information; Agriculture, Forestry, Fishing & Hunting; Educational Services; Utilities; Retail Trade; Wholesale Trade; and Professional, Scientific & Technical Services. The six industries reporting a decrease in inventories in March — in the following order — are: Real Estate, Rental & Leasing; Mining; Other Services; Management of Companies & Support Services; Construction; and Health Care & Social Assistance.

Prices
Prices paid by services organizations for materials and services increased in March for the 94th consecutive month. The Prices Index registered 60.9 percent, 1.7 percentage points lower than the 62.6 percent recorded in February. The March reading is its fourth consecutive month above 60 percent and the 29th in a row below 70 percent.

Fourteen of the 18 services industries reported an increase in prices paid during the month of March, in the following order: Construction; Accommodation & Food Services; Finance & Insurance; Arts, Entertainment & Recreation; Information; Real Estate, Rental & Leasing; Wholesale Trade; Public Administration; Educational Services; Other Services; Professional, Scientific & Technical Services; Health Care & Social Assistance; Agriculture, Forestry, Fishing & Hunting; and Utilities. The only industry reporting a decrease in prices paid in March is Retail Trade.

NOTE: Commodities reported as up in price and down in price are listed in the commodities section of this report.

Backlog of Orders
The ISM^® Services Backlog of Orders Index contracted in March after one month of expansion. The reading of 47.4 percent is 4.3 percentage points lower than the 51.7 percent reported in February. Of the total respondents in March, 41 percent indicated they do not measure backlog of orders. Respondent comments include: "Seeing more commercial construction contracts" and "Overall backlog was lower than last month because there was slight slowing down in new orders."

The six industries reporting an increase in order backlogs in March — in the following order — are: Finance & Insurance; Transportation & Warehousing; Educational Services; Public Administration; Information; and Utilities. The six industries reporting a decrease in order backlogs in March — in the following order — are: Real Estate, Rental & Leasing; Professional, Scientific & Technical Services; Wholesale Trade; Retail Trade; Construction; and Health Care & Social Assistance. Six industries reported no change in backlogs in March.

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 contracted for the first time in four months in March. The New Export Orders Index registered 45.8 percent, down 6.3 percentage points compared to the February reading of 52.1 percent. Of the total respondents in March, 78 percent indicated they do not perform, or do not separately measure, orders for work outside of the U.S. Respondent comments include: "Additional Canadian opportunities" and "Tariff threat."

The two industries reporting an increase in new export orders in March are: Retail Trade; and Information. The seven industries reporting a decrease in new export orders in March — in the following order — are: Real Estate, Rental & Leasing; Management of Companies & Support Services; Construction; Accommodation & Food Services; Educational Services; Professional, Scientific & Technical Services; and Wholesale Trade. Nine industries reported no change.

Imports
The Imports Index expanded for the first time since December 2024, registering 52.6 percent, 3 percentage points higher than the 49.6 percent reported in February. The index has indicated expansion in 24 of the last 31 months. Seventy-eight percent of respondents reported that they do not use, or do not track the use of, imported materials. Respondent comments include: "Importing higher amounts in advance of tariff impacts" and "Continuing to divert sourcing from China."

The nine industries reporting an increase in imports for the month of March — in the following order — are: Arts, Entertainment & Recreation; Other Services; Retail Trade; Agriculture, Forestry, Fishing & Hunting; Educational Services; Utilities; Professional, Scientific & Technical Services; Information; and Wholesale Trade. The two industries reporting a decrease in imports in March are: Management of Companies & Support Services; and Health Care & Social Assistance. Seven industries reported no change in imports in March.

Inventory Sentiment
The ISM^® Services Inventory Sentiment Index grew for the 23rd consecutive month in March. The index registered 56.6 percent, an increase of 1.9 percentage points from February's figure of 54.7 percent. This reading indicates that respondents feel their inventories are too high when correlated to business requirements.

The 10 industries reporting sentiment that their inventories were too high in March — listed in order — are: Mining; Retail Trade; Utilities; Wholesale Trade; Agriculture, Forestry, Fishing & Hunting; Construction; Health Care & Social Assistance; Professional, Scientific & Technical Services; Public Administration; and Information. The only industry reporting feeling that its inventory is too low in March is Real Estate, Rental & Leasing. Seven industries reported no change in inventory sentiment in March.

About This Report
DO NOT CONFUSE THIS NATIONAL REPORT with the various regional purchasing reports released across the country. The national report's information reflects the entire U.S., while the regional reports contain primarily regional data from their local vicinities. Also, the information in the regional reports is not used in calculating the results of the national report. The information compiled in this report is for the month of March 2025.

The data presented herein is obtained from a survey of supply executives in the services sector based on information they have collected within their respective organizations. ISM^® makes no representation, other than that stated within this release, regarding the individual company data collection procedures. The data should be compared to all other economic data sources when used in decision-making.

Data and Method of Presentation
The Services ISM^® Report On Business^® (formerly the Non-Manufacturing ISM^® Report On Business^®) is based on data compiled from purchasing and supply executives nationwide. Membership of the Services Business Survey Panel (formerly Non-Manufacturing Business Survey Committee) is diversified by NAICS, based on each industry's contribution to gross domestic product (GDP). The Services Business Survey Panel responses are divided into the following NAICS code categories: Agriculture, Forestry, Fishing & Hunting; Mining; Utilities; Construction; Wholesale Trade; Retail Trade; Transportation & Warehousing; Information; Finance & Insurance; Real Estate, Rental & Leasing; Professional, Scientific & Technical Services; Management of Companies & Support Services; Educational Services; Health Care & Social Assistance; Arts, Entertainment & Recreation; Accommodation & Food Services; Public Administration; and Other Services (services such as Equipment & Machinery Repairing; Promoting or Administering Religious Activities; Grantmaking; Advocacy; and Providing Dry-Cleaning & Laundry Services, Personal Care Services, Death Care Services, Pet Care Services,

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