Economic activity in the services sector was unchanged in September, according to the latest ISM Services PMI Report. The Services PMI reading of 50% was at the breakeven point between expansion and contraction for the first time since January 2010.
The report was issued by Steve Miller, chair of the Institute for Supply Management (ISM) services business survey committee: “In September, the Services PMI registered an unchanged reading of 50 percent, 2 percentage points lower than the August figure of 52 percent. The Business Activity Index moved into contraction territory in September, registering 49.9 percent, 5.1 percentage points lower than the reading of 55 percent recorded in August. This is the first time the index has entered contraction territory since May 2020. The New Orders Index remained in expansion in September, with a reading of 50.4 percent, down 5.6 percent from August’s figure of 56 percent. The Employment Index remained in contraction territory for the fourth month in a row and the fifth time in the last six months; the reading of 47.2 percent is 0.7 percentage point higher than the 46.5 percent recorded in August.”
Miller continued, “The Supplier Deliveries Index registered 52.6 percent, 2.3 percentage points higher than the 50.3 percent recorded in August and its highest reading since February (53.4 percent). This is the 10th 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 percent indicates slower deliveries, which is typical as the economy improves and customer demand increases.) The Prices Index registered 69.4 percent in September, a 0.2-percentage point increase from August’s reading of 69.2 percent. The index has exceeded 60 percent for 10 straight months, its longest such streak since 30 consecutive readings above 60 percent from October 2020 to March 2023.”
Miller added, “The Inventories Index dropped into contraction in September after three months in expansion territory, registering 47.8 percent, a decrease of 5.4 percentage points from August’s figure of 53.2 percent. The Inventory Sentiment Index expanded for the 29th consecutive month, registering 55.7 percent, up 0.2 percentage point from August’s figure of 55.5 percent. The Backlog of Orders Index was in contraction territory for the seventh month in a row, registering 47.3 percent in September, but with a 6.9-percentage point jump from the August figure of 40.4 percent to hit its highest reading since April (48 percent).”
Miller concluded, “Ten industries reported growth in September, two fewer than in August, while the number reporting contraction increased from four to seven. The September reading of 50 percent is 2 percentage points below the 12-month average of 52 percent. The 12-month average figure is the lowest since September 2024 (51.8 percent). September’s Services PMI level returned to numbers very similar to May and July, with weakness in business activity and continued weakness in employment. The recovery in the Backlog of Orders Index to a reading indicating slower contraction was a positive signal, as was continued expansion in the New Orders index. Commentary in general indicated moderate or weak growth, with more isolated observations of supplier delivery challenges. Employment continues to be in contraction territory, thanks to a combination of delayed hiring efforts and difficulty finding qualified staff.”
The 10 services industries reporting growth in September — listed in order — are:
- Accommodation and Food Services
- Health Care and Social Assistance
- Other Services
- Information
- Public Administration
- Educational Services
- Wholesale Trade
- Finance and Insurance
- Transportation and Warehousing
- Utilities
The seven industries reporting a contraction in the month of September — listed in order — are:
- Mining
- Agriculture, Forestry, Fishing and Hunting
- Construction
- Management of Companies and Support Services
- Professional, Scientific and Technical Services
- Retail Trade
- Real Estate, Rental and Leasing
