Economic activity in the services sector continued to expand in October, according to purchasing and supply executives in the latest ISM Services PMI Report. The Services PMI registered 54.5%, the 28th consecutive month in expansion territory.
The report was issued by Steve Miller, chair of the Institute for Supply Management (ISM) services business survey committee: “In October, the Services PMI registered 54.5%, a decrease of 0.4 percentage point compared to September’s figure of 54.9%. The Business Activity Index remained in expansion territory in October, decreasing 2.7 percentage points to 53.8% from September’s reading of 56.5%. The New Orders Index registered 55.9%, 3.9 percentage points below September’s figure of 59.8%. The Employment Index remained in expansion territory for the second month in a row with a reading of 51.4%, a 1.3-percentage point increase from the 50.1% recorded in September.”
Miller continued, “The Supplier Deliveries Index registered 56.7%, 3.5 percentage points higher than the 53.2% recorded in September. This is the 23rd consecutive month that the index has been in expansion territory, indicating slower supplier delivery performance. (Supplier Deliveries is the only ISM PMI Reports index that is inversed; a reading of above 50% indicates slower deliveries, which is typical as the economy improves and customer demand increases.) The Prices Index registered above 70% for the seventh time in eight months; the reading of 73% in October is 1 percentage point below September’s figure of 74%. The index has exceeded 60% for 23 straight months, and its 12-month average increased by 0.2 percentage point to 69.2%, the highest since April 2023.”
Miller added, “The Inventories Index registered 55.4%, down 2.4 percentage points from September’s figure of 57.8%. The Inventory Sentiment Index expanded for the 42nd consecutive month, registering 52.1%, up 0.4 percentage point from September’s figure of 51.7%. The Backlog of Orders Index recorded a ninth straight month in expansion territory, increasing 1.4 percentage points to 58% in October from September’s reading of 56.6%. The New Export Orders returned to expansion territory after one month in contraction, registering 55.2%, an increase of 8.3 percentage points from the 46.9% recorded in September. The Imports Index recorded a fourth straight month in expansion territory; the figure of 54.2% in October is an increase of 1.3 percentage points compared to the 52.9% registered in September.”
Miller commented, “Fifteen industries indicated growth in October, two more than the previous month, while two reported contraction, two fewer than in September. The October Services PMI reading of 54.5% is 0.2 percentage point above the 12-month average of 54.3%. The uptick of 0.2 percentage point over September’s 12-month average of 54.1% marks the 10th straight month that figure has increased. No commodities were reported as down in price in October, with fuel reported as up in price for a ninth month in a row. Memory products were reported as up in price for the 10th month in a row, and memory components were reported as in short supply. The number of commodities in short supply decreased from seven to three, all related to computer technologies. The Supplier Deliveries Index continued to indicate slower performance, increasing for a second month in a row with an increase to 56.7%, 2.5 percentage points above its 12-month average of 54.2%. The Employment Index (51.4%) expanded for its second month in a row and is 2.1 percentage points above its 12-month average of 49.3%. The New Orders, Business Activity, and Inventory Sentiment indexes are below their 12-month averages, but for the first time since February 2026, all 10 indexes were in expansion territory.”
Miller concluded, “Tariffs and fuel cost impacts continued to be the most-cited issues impacting respondents’ supply chains, while many respondents indicated they are not yet seeing the full impact of these cost escalations or have not passed them through to customers. This indicates that more pricing pressure is on the way if oil and tariff cost impacts are not mitigated, even if they do not increase from current levels. Commentary on supply chain constraints increased significantly month over month, while the Backlog of Orders Index increased to 58%, its highest reading since it registered 58.3% in July 2022. The commodities identified as in short supply, however, decreased month over month, from seven to three. The Employment Index’s second consecutive reading above 50% may indicate help is on the way for slowing supplier deliveries and increasing order backlogs. While the Backlog of Orders index hit its highest level since July 2022, the Supplier Deliveries Index reading in October is the second highest in that timeframe, exceeded only by April 2026 (56.8%).”
Industry Performance
The 15 services industries reporting growth in October — listed in order — are: transportation and warehousing; wholesale trade; information; retail trade; arts, entertainment and recreation; finance and insurance; other services; real estate, rental and leasing; accommodation and food services; agriculture, forestry, fishing and hunting; utilities; educational services; management of companies and support services; professional, scientific and technical services; and public administration. The two industries reporting a contraction in the month of October are: construction; and health care and social assistance.
