Economic activity in the services sector was unchanged in September. A Services PMI reading of 50% was at the breakeven point between expansion and contraction for the first time since January 2010.
“In September, the Services PMI® registered an unchanged reading of 50%, two percentage points (pp) lower than the August figure of 52%. The Business Activity Index moved into contraction territory in September, registering 49.9%, 5.1 pp lower than the reading of 55% recorded in August,” said Steve Miller, CPSM, CSCP, Chair of the Institute for Supply Management® (ISM®) Services Business Survey Committee. This is the first time the index has entered contraction territory since May 2020. Respondents from the Accommodation & Food Services said, “We are beginning to see the impact of the tariffs impact our business, particularly for food products from India, China, and Southeast Asia, coffee from South America, and apparel and electronics from Asia. Our year-over-year cost increases are getting progressively greater.”
“The New Orders Index remained in expansion in September, with a reading of 50.4%, down 5.6% from August’s figure of 56%. 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% is 0.7 pp higher than the 46.5% recorded in August,” said Miller. Respondents from the Professional, Scientific & Technical Services said, “Client demand in professional services remains steady, though decision-making timelines are lengthening due to continued economic uncertainty and interest-rate concerns. We are also seeing modest upward pressure on labor costs, which impacts both our internal resourcing and supplier pricing.”
The Inventories Index dropped into contraction in September after three months in expansion territory, registering 47.8%, a decrease of 5.4 pp from August’s figure of 53.2%. The Inventory Sentiment Index expanded for the 29th consecutive month, registering 55.7%, up 0.2 pp from August’s figure of 55.5%. The Backlog of Orders Index was in contraction territory for the seventh month in a row, registering 47.3% in September, but with a 6.9-percentage point jump from the August figure of 40.4% to hit its highest reading since April’s reading of 48%.
Employment activity in the services sector contracted in September for the fourth month in a row. The Employment Index registered 47.2%, up 0.7 pp from the August figure of 46.5% and equal to the June reading. Comments from respondents include: “We have lost employees due to normal attrition and are pausing backfilling these positions at this time” and “Artificial intelligence (AI) is (positively) impacting resource productivity.”
Read the ISM release.
