Economic activity in the services sector continued to expand in August, according to the latest ISM Services PMI Report. The services PMI registered 55.4%, the 26th 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 August, the Services PMI registered 55.4%, an increase of 1.3 percentage points compared to July’s figure of 54.1%. The Business Activity Index remained in expansion territory in August, increasing 2.6 percentage points to 61.7% from July’s reading of 59.1%. The New Orders Index registered 60.9%, 3.7 percentage points above July’s figure of 57.2%. The Employment Index contracted for a second straight month with a reading of 47.8%, a 0.4-percentage point increase from the 47.4% recorded in July.”
Miller added, “The Supplier Deliveries Index registered 51.3%, 1.5 percentage points lower than the 52.8% recorded in July. This is the 21st 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 fifth time in six months; the reading of 72.6% in August is 2.3 percentage points above July’s figure of 70.3%. The index has exceeded 60% for 21 straight months, with its 12-month average increasing by 0.4 percentage point to 68.5%, the highest since April 2023.”
Miller continued, “The Inventories Index registered 56.7%, up 5.3 percentage points from July’s figure of 51.4%. The Inventory Sentiment Index expanded for the 40th consecutive month, registering 54.1%, up 1.6 percentage points from July’s figure of 52.5%. The Backlog of Orders Index remained in expansion territory for a seventh straight month, increasing 4.7 percentage points to 55.6% in August from July’s reading of 50.9%. The New Export Orders remained at or above 50% for the seventh month in a row, registering 56.3%, an increase of 4.3 percentage points compared to the 52% recorded in July. The Imports Index recorded a second straight month in expansion territory; the figure of 56.3% in August is an increase of 4.5 percentage points compared to the 51.8% registered in July. Twelve industries indicated growth in August, one fewer than the previous month, while five reported contraction, up one compared to July. The August Services PMI reading of 55.4% is 1.7 percentage points above the 12-month average of 53.7%. The uptick of 0.3 percentage point over July’s 12-month average of 53.4% marks the eighth straight month that figure has increased.”
Miller said, “The Prices Index registered 72.6%, broke the 70-percent threshold for the fifth time in six months and hit its highest level since August 2022 (72.6%). After six commodities were reported as down in price in July, that total dropped to a single commodity: fuel, which was also reported as up in price for a seventh month in a row. Petroleum-related products, diesel, and gasoline were again reported as up in price in August. Graphics processing units (GPUs) and steel were added as commodities in short supply. The Supplier Deliveries Index continued to indicate slower performance; however, the reading of 51.3% is the fourth straight decrease and is 2.4 percentage points below the 12-month average of 53.7%. The Employment Index (47.8%) remained below its 12-month average of 48.8%. This index has been below 50% in 13 of the last 18 months. However, the Business Activity Index had its highest reading since hitting 62.7% in November 2022, and the New Orders Index had its highest reading since February 2023 (61%).”
Miller added, “Tariffs and the Middle East conflict returned as the most cited issues impacting respondents’ supply chains. Positive summer seasonality was also a common theme, with Accommodation and Food Services and Arts, Entertainment and Recreation both among the five fastest-growing industries in August. As a potentially positive sign for employment, there was a slight reduction in the share of companies cutting staff levels, down from 19% in July to 17.1% in August. The Business Activity and New Orders indexes at multiyear highs could signal a shift to increased employment in the services sector. The Backlog of Orders index reached its highest level since a reading of 55.9% in February 2026, some respondents attributed increased backlogs to low staffing levels at their companies.”
The 12 services industries reporting growth in August — listed in order — are: mining; real estate, rental and leasing; accommodation and food services; wholesale trade; arts, entertainment and recreation; educational services; retail trade; information; professional, scientific and technical services; utilities; transportation and warehousing; and public administration. The five industries reporting a contraction in the month of august are: agriculture, forestry, fishing and hunting; construction; management of companies and support services; finance and insurance; and health care and social assistance.
