The Institute for Supply Management (ISM) Services PMI registered 56.5% in November, marking the 30th consecutive month of economic expansion in the services sector, which includes construction. This reading represents a 2.1 percentage point increase from October’s 54.4% and signals that business activity continues to grow at a faster rate heading into the final weeks of the year. For construction firms navigating this evolving economic landscape, leveraging technology such as a Guide to Telematics a Unique Fleet Management solution for construction sector can provide the operational visibility needed to maintain momentum during periods of supply chain adjustment and pricing volatility.
ISM Services PMI Overview: November Performance and Sector Rankings
The ISM Services PMI index is a composite economic indicator based on surveys of private-sector companies in the services sector, which encompasses construction among its 18 tracked industries. November’s reading of 56.5% reflects broad-based expansion, with 13 industries reporting growth. Construction ranked as the fourth fastest growing sector in the services industry, trailing only real estate and rental and leasing, mining, and agriculture and related activities.
Anthony Nieves, chair of the ISM Services Business Survey Committee, noted that the Business Activity Index registered 64.7% in November, an increase of 9 percentage points from October. This sharp acceleration in business activity suggests that service-oriented construction firms are experiencing rising demand as the industry approaches year-end project completions and new contract mobilizations. The composite index indicated growth for the 30th consecutive month after a two-month contraction in April and May 2020, with growth continuing at a faster rate for the services sector overall.
Supply Chain Dynamics: Supplier Deliveries and Materials Availability
Supply chain conditions showed mixed signals in November, with some improvement in lead times balanced against persistent material shortages. The Supplier Deliveries Index registered 53.8%, down 2.4 percentage points from October’s 56.2%. A reading above 50% indicates slower deliveries, but the decline suggests that suppliers are gradually catching up with demand after extended periods of severe disruption.
Nieves explained that increased capacity and shorter lead times among suppliers have contributed to a continued improvement in delivery performance. Construction firms have reported that transportation bottlenecks are easing, though the benefits have not been uniform across all material categories. Respondent comments highlighted that supply chain transportation improvements and slightly more capacity in the supply chain are helping firms work through backlogs more efficiently.
Concrete Supply Remains Tight
For the second consecutive month, concrete was identified as a material in short supply. This ongoing constraint has implications for construction schedules and cost projections, particularly for projects with significant foundation and structural concrete requirements. Industry respondents noted that concrete availability continues to lag behind demand, forcing some contractors to extend project timelines or source alternative mix designs to keep work progressing.
The persistent concrete shortage underscores the importance of proactive material procurement and supplier relationship management. Contractors who maintain strong communication with ready-mix suppliers and plan concrete placements well in advance have been better positioned to mitigate delays. The shortage also reinforces the value of maintaining flexible project schedules that can accommodate material availability constraints.
Commodities Pricing Trends
Commodities pricing remained elevated in November, with construction materials among the categories reporting price increases. The ISM Prices Index continued to reflect upward pressure, driven by fuel costs, transportation expenses, and raw material inputs. No industry reported a decrease in prices for November, confirming that inflation pressures across the construction supply chain remain persistent. Key observations from the pricing data include:
- Construction materials increased in price for multiple consecutive months, contributing to tighter margins for contractors operating on fixed-price contracts
- Fuel and diesel costs remained elevated, directly impacting equipment operation expenses and material transportation costs across project sites
- Steel products showed mixed pricing trends, with some categories stabilizing while others continued to climb due to ongoing demand
- Lumber and wood products experienced price moderation compared to earlier in the year, offering some relief for residential and commercial framing work
For firms operating in this environment, disciplined Financial Management Strategies for Construction Companies navigating Market cycles are essential to preserving profitability when input costs are rising faster than bid prices can be adjusted. Contractors should evaluate contract escalation clauses and maintain diversified supplier networks to manage pricing risk effectively.
Employment and Labor Market Conditions in Construction
The ISM Employment Index registered 51.5% in November, up 2.4 percentage points from October and signaling a return to employment growth after a contraction the previous month. This improvement was driven in part by increases in business activity, which encouraged firms to expand their workforce to meet project demand. The rate of growth increased in November due to increases in business activity and employment across the services sector.
Construction specifically showed improvement in labor levels during November, reversing the modest declines observed in October. This positive trend aligns with broader industry observations that skilled labor availability, while still challenging in certain trades, has stabilized compared to the acute shortages experienced throughout 2021 and early 2022. Several respondent comments noted that new fiscal periods and the holiday season contributed to stronger business activity and increased employment levels.
Key Labor Market Indicators
The following table summarizes the key ISM services sector indices relevant to construction employment and activity levels for November:
| ISM Index | November Reading | October Reading | Change | Interpretation |
|---|---|---|---|---|
| Services PMI | 56.5% | 54.4% | +2.1 pp | Expansion at faster rate; 30th month of growth |
| Business Activity | 64.7% | 55.7% | +9.0 pp | Strong acceleration in activity levels |
| New Orders | 56.0% | 56.5% | -0.5 pp | Continued growth; 30th consecutive month |
| Employment | 51.5% | 49.1% | +2.4 pp | Return to growth after October contraction |
| Supplier Deliveries | 53.8% | 56.2% | -2.4 pp | Slower slowing; supply chains improving |
| Backlog of Orders | 51.8% | 52.2% | -0.4 pp | Backlogs growing; 23rd consecutive month |
| Prices | Elevated | Elevated | Stable | Continued upward pressure on input costs |
The employment recovery in construction is a welcome development for an industry that has struggled with labor shortages for several years. However, with business activity surging and new orders remaining positive, the demand for skilled workers is likely to intensify further in the coming months as firms compete for qualified personnel.
Workforce Planning Considerations
Construction firms should consider several strategies to capitalize on improving labor availability while preparing for potential future tightness in the recruitment market:
- Invest in training and apprenticeship programs to develop a pipeline of skilled workers for current and future project commitments
- Leverage technology solutions for workforce management, scheduling, and field productivity tracking to maximize the output of existing crews
- Evaluate compensation structures and benefits packages to remain competitive in attracting and retaining qualified personnel in a tight market
- Implement robust safety programs and Construction Site Risk Management and Insurance Comprehensive Guide practices to reduce turnover and protect workers from job site hazards
Strategic Outlook: Navigating the Construction Economic Landscape
The November ISM data paints a picture of a construction sector performing well but facing persistent headwinds that require active management. Business activity is accelerating at the fastest pace in recent months, employment is recovering from a brief contraction, and new orders remain solidly in positive territory. At the same time, pricing pressures, material shortages in key categories like concrete, and supply chain uncertainties continue to demand attention from industry leaders.
Backlog and Forward Momentum
The ISM Services Backlog of Orders Index registered 51.8% in November, growing for the 23rd consecutive month. This sustained backlog growth indicates that construction firms have a solid pipeline of work extending into the new year. Of the total respondents in November, 32% indicated they do not measure backlog of orders, suggesting that firms that do track this metric are better positioned to forecast resource requirements and manage project timelines.
Industries reporting the strongest backlog growth included construction, management of companies and support services, wholesale trade, information, and educational services. The broad-based nature of this backlog growth confirms that demand for construction services remains robust across multiple market segments, from commercial and residential to infrastructure and industrial projects.
New Orders as a Leading Indicator
ISM’s New Orders Index registered 56% in November, a slight decrease of 0.5 percentage point from October’s 56.5% but still firmly in expansion territory. This marks the 30th consecutive month of new orders growth after two months of contraction and a preceding period of 128 months of expansion, reflecting sustained demand for construction services. The slight moderation in the new orders growth rate may indicate a normalization from the exceptionally rapid pace seen earlier in the post-pandemic recovery period.
Construction was among the industries reporting growth in new orders, alongside real estate, accommodation and food services, information, educational services, and finance and insurance. Respondent comments noted that new customers were being added as business expanded, suggesting that the demand environment remains favorable for growth-oriented construction firms.
Environmental and Regulatory Considerations
As construction activity remains robust, firms must also contend with evolving environmental regulations and compliance requirements that affect project planning and execution. Effective Construction Site Environmental Management and Erosion Control Best practices are becoming increasingly important as regulatory agencies tighten oversight of stormwater management, sediment control, and site runoff during active construction operations. Firms that integrate environmental compliance into their project planning processes are better positioned to avoid delays and regulatory penalties.
Key Takeaways for Industry Leaders
Based on the November ISM Services Report on Business, construction industry leaders should prioritize the following action items to navigate the current economic environment:
- Monitor supply chain improvements closely as supplier delivery performance continues to improve, creating opportunities to renegotiate lead times and reduce project schedule buffers
- Plan concrete procurement strategically given the ongoing shortage, including exploring alternative mix designs and maintaining close communication with ready-mix suppliers
- Capitalize on improving labor availability by actively recruiting and training skilled workers while the employment market is more favorable than it was earlier in the year
- Prepare for continued pricing pressure by incorporating escalation clauses in contracts and maintaining strong relationships with multiple material suppliers
- Leverage technology for operational efficiency including telematics, project management software, and financial management tools to maintain margins in a high-cost operating environment
The ISM report confirms that the construction sector heads into the final weeks of the year with strong momentum. Business activity is accelerating, employment is recovering, and order backlogs provide a solid foundation for continued growth into the new year. By staying attuned to the supply chain, labor, and pricing dynamics identified in the November data, construction firms can position themselves to navigate the months ahead with confidence and operational resilience.