U.S. ISM Services PMI at a Three-Month Low, Still Indicating Expansion for the 28th Straight Month

Summary

• The U.S. ISM Services PMI declined to 54.5 in October from 54.9 in September & 55.4 in August, marking the lowest reading in three months while indicating expansion for the 28th consecutive month.
• The October reading of 54.5 remained above the 12-month average of 54.3 & the October 2025 level of 52.0, though it fell below the February 2026 peak of 56.1 & the November 2021 record of 67.5.
• The Action Economics Forecast Survey had predicted a 54.7 reading for October.
• The Haver Analytics composite index, combining services & manufacturing readings, slipped to 54.6 in October from 54.9 in September & 55.3 in August, signaling expansion for the 17th consecutive month at the weakest pace since July.
• The Business Activity index fell to 53.8 in October from 56.5 in September & 61.7 in August, representing the lowest level since September 2025 while continuing expansion for 28 months.
• In October, 20.8% of respondents reported higher business activity while 11.4% reported a decline.
• The New Orders index decreased to 55.9 in October from 59.8 in September & 60.9 in August, reflecting expansion for the 17th successive month at the slowest pace since June.
• In October, 26.1% of respondents reported higher new orders while 9.0% reported declines.
• The Supplier Deliveries index rose to 56.7 in October from 53.2 in September, indicating slower performance for the 23rd straight month.
• The Employment index advanced to 51.4 in October from 50.1 in September, showing expansion for the second straight month after contracting in August & July.
• In October, 16.6% of respondents indicated higher employment while 13.5% reported declines.
• The Prices Index edged down to 73.0 in October from 74.0 in September, remaining above 70 for the seventh time in eight months & indicating rising prices since June 2017.
• In October, 48.6% of respondents reported higher prices while only 4.0% reported price declines.
• The New Export Orders index rebounded to 55.2 in October from 46.9 in September, showing expansion for the fourth time in five months.
• The Imports index climbed to 54.2 in October from 52.9 in September, marking the eighth expansion in nine months.
• The Inventories index slid to 55.4 in October from 57.8 in September, indicating expansion for the ninth consecutive month at the weakest pace since July.
• The Inventory Sentiment Index edged up to 52.1 from 51.7, showing continued expansion since May 2023.
• The Backlog of Orders index increased to 58.0 in October from 56.6 in September, marking the fastest pace of expansion since July 2022 following an 11-month contraction period from March 2025 through January 2026.
• The ISM Services PMI is a composite index of four equally weighted diffusion indexes: Business Activity, New Orders, Employment, & Supplier Deliveries.
• A reading above 50 indicates expansion in the services sector, while a reading below 50 suggests contraction.
• Supplier Deliveries is the only ISM index that is inversed, where a reading above 50 indicates slower deliveries.