Line chart showing two purchasing managers’ indexes: ISM Manufacturing PMI and ISM Non-manufacturing PMI (over 50=expansion) from January 2007 to December 2023. ISM manufacturing and non-manufacturing indexes both fell considerably in the 2008 – 2009 recession. Both largely expanded after that recession, generally remaining above the expansion minimum of 50. But both trended down from recent highs near 60 in 2018 to lows near 40 in April 2020. Both had recovered significantly by the end of Q3 2020, with non-manufacturing near 58 and manufacturing above 55. As of the end of December 2023, manufacturing was at 47 and non-manufacturing at 51.
Sources: Bloomberg, Institute for Supply Management, and Wells Fargo Investment Institute. Monthly data from January 1, 2007 to December 31, 2023. The Institute for Supply Management (ISM) Manufacturing Index® is a composite index based on five indicators with equal weights. The ISM Non-Manufacturing Index® is a composite index based on four indicators with equal weights.
Key Takeaways
- A revival of service-industry activity since 2023 has been supported by persistent post-pandemic pent up demand.
- Service-sector resilience and ongoing weakness in manufacturing have created unbalanced economic growth likely to converge toward weakness, as household spending on travel, entertainment, and other economically sensitive services lose support as spending restraint takes hold.