ISM Services Prices

ISM Services Prices is the Prices Index inside the Services ISM Report On Business, published by the Institute for Supply Management in Tempe, Arizona. Its Services Business Survey Committee gathers answers from purchasing and supply executives across 18 industries classified by NAICS and weighted by GDP share. It tracks input costs, meaning prices paid by US services organizations for materials and services, running since June 1998. It is not CPI (consumer-price inflation, what households pay), not the headline Services PMI (the 4-part composite), and not regional or manufacturing prices.

Surveys go out early each month for US operations only, with most responses arriving late for accuracy. It posts at ismrob.org on the 3rd business day of the next month after 10:00 a.m. ET, or the 4th in January. The date shifts if the New York Stock Exchange is closed, and raw responses are never revised while seasonal factors update yearly. Each release also includes the composite, industry rankings and commodity lists, read as increasing above 50% or decreasing below, with distance showing strength.

Prices has no weighted parts, so watch the breadth of reports plus the goods and services firms actually buy.

• Input materials: prices paid for goods used by services firms, such as chemicals, steel and aluminum.
• Fuels and transport: diesel, gasoline, freight and transportation costs that raise operating expenses.
• Labor and purchased services: pay for staff and outside services bought by services organizations.
• Industry breadth: how many of the 18 industries report higher prices, from real estate to health care.
• Supply pressure: shortages plus capacity and logistical constraints that let suppliers charge more.

Commodity notes give consecutive-month counts. The historical example is the May 4, 2022 release for April 2022. The Prices Index hit an all-time high of 84.6%, up 0.8 point from 83.8%, rising for the 59th straight month. The split was 75.4% higher, 24.4% same and 0.2% lower, with all 18 industries reporting higher prices paid. The move ran against softer growth: the composite fell 1.2 points to 57.1% and New Orders fell 5.5 points to 54.6%. Employment fell 4.5 points to 49.5%, while Business Activity rose 3.6 points to 59.1%. The Chair cited high inflation, capacity constraints, logistical challenges and Russia-Ukraine war effects on fuel and chemical costs. That 57.1% reading translated into 2.5% annualized real GDP growth.

1. Collect: Each respondent reports whether prices paid rose, stayed the same or fell versus the prior month, for US operations only. Industry answers are weighted by GDP share.
2. Tabulate: Responses become 3 shares: %Higher (H), %Same (S) and %Lower (L).
3. Diffuse: Add H plus 0.5 times S, using unrounded numbers; for example, 30% higher, 55% same and 15% lower gives 30 + 27.5 = 57.5.
4. Adjust: Apply seasonal adjustment to get the published index. It corrects repeating calendar effects from weather, institutional arrangements and non-moveable holidays. For example, subtract 0.4 point from 57.5 to publish 57.1, faster than 56.5.
5. Exclude from composite: The headline Services PMI averages 4 other indexes equally, so Prices never enters that average arithmetically. Those 4 are Business Activity, New Orders, Employment and Supplier Deliveries. Supplier Deliveries is the only inversed index: above 50% means slower deliveries.