U.S. services-sector activity continued expanding in October 2026, although business activity and new orders moderated while input prices remained elevated. According to the Institute for Supply Management (ISM), the Services Purchasing Managers’ Index (PMI) registered 54.5%, down from 54.9% in September. The November 4 report also showed slower supplier deliveries and a modest improvement in employment conditions, reflecting a combination of continued economic activity and operating cost pressures.
Key Takeaways
- The ISM Services PMI registered 54.5% in October, down from 54.9% in September
- The Business Activity Index declined to 53.8%, while the New Orders Index fell to 55.9%
- The Prices Index reached 73%, remaining above 70 for the seventh time in eight months
- The Supplier Deliveries Index increased to 56.7%, indicating slower delivery performance
- The Employment Index rose to 51.4%, marking a second consecutive month of expansion
U.S. Services Sector Maintains Expansion in October
The U.S. services sector expanded for the 28th consecutive month in October, according to ISM’s latest survey of purchasing and supply executives. The headline Services PMI registered 54.5%, a decrease of 0.4 percentage points from September’s reading of 54.9%.
A Services PMI above 50% indicates that the sector is generally expanding, while a reading below 50% signals contraction. October’s figure therefore showed continued growth despite a lower monthly reading.
The result followed the September services growth report, which recorded a decline in the PMI from 55.4% in August to 54.9% in September. The September survey also identified rising input costs, with the Prices Index increasing to 74%.
October’s data extended this pattern of expansion accompanied by cost pressures. Although the headline PMI remained positive, the Business Activity and New Orders indexes both declined, suggesting a slower pace of growth in those areas.
Of the industries surveyed, 15 reported expansion during October. Transportation and warehousing, wholesale trade, information, and retail trade were among the sectors reporting growth, while construction and health care and social assistance reported contraction.
These differences indicate that business conditions varied across the services economy even as the overall sector continued expanding.
Business Activity and New Orders Moderate in October
Business activity and new orders remained in expansion territory during October, although both indexes declined from September.
The Business Activity Index fell 2.7 percentage points to 53.8%, compared with 56.5% in September. The reading indicated continued expansion in current business operations, but at a slower pace than the previous month.
New orders also moderated. The New Orders Index declined 3.9 percentage points to 55.9%, compared with 59.8% in September. Despite the decrease, the index remained above 50% for the 17th consecutive month.
The two indexes measure different aspects of business conditions. Business activity reflects changes in current operations, while new orders provide an indication of incoming customer demand.
October’s results showed that service providers continued receiving additional business, although the reported pace of order growth was lower than in September.
The decline was particularly relevant alongside elevated input prices. Businesses faced continued purchasing cost pressures while reporting more moderate growth in activity and demand.
ISM Prices Index Signals Continued Input Cost Pressures
Input prices remained elevated in October, with the ISM Services Prices Index registering 73%, compared with 74% in September.
Although the index declined by one percentage point, October marked the seventh time in eight months that it exceeded 70%. Prices paid by services organizations for materials and services also increased for the 113th consecutive month, according to ISM.
Earlier figures showed a similar pattern. The August services input costs reached their highest index reading since August 2022, when the Prices Index increased to 72.6% from 70.3% in July.
October’s elevated reading suggests that many service providers continued experiencing rising purchasing costs. Seventeen industries reported increases in prices paid, including transportation and warehousing, construction, information, finance and insurance, and accommodation and food services.
The Prices Index is a diffusion index that measures the direction and breadth of reported price changes. It does not mean that business costs increased by 73%, nor does it directly measure consumer inflation.
Nevertheless, sustained increases in business input prices remain relevant to inflation assessments because purchasing expenses can influence operating budgets and pricing decisions.
Supplier Deliveries Slow as Procurement Pressures Persist
Supplier delivery performance weakened in October, with the Supplier Deliveries Index increasing to 56.7% from 53.2% in September.
Unlike most PMI components, the Supplier Deliveries Index uses an inverse interpretation. A reading above 50% indicates slower supplier deliveries, while a reading below 50% indicates faster deliveries.
October marked the 23rd consecutive month of slower delivery performance among surveyed services businesses.
Extended delivery times can affect procurement schedules, inventory decisions, and the availability of materials needed for business operations. Companies that depend on outside suppliers may need to adjust purchasing plans when expected deliveries take longer.
Survey respondents also identified concerns involving transportation expenses, tariffs, and supply availability. However, the index measures changes in delivery performance rather than establishing a single cause for delays.
Combined with the elevated Prices Index, October’s delivery data provided another indication of the operating challenges facing service-sector businesses.
Services Employment Expands for a Second Consecutive Month
Employment conditions improved in October, with the ISM Services Employment Index increasing to 51.4% from 50.1% in September.
The 1.3-percentage-point increase marked the second consecutive month of expansion in the employment measure.
The improvement occurred despite lower readings in business activity and new orders, indicating that employment conditions moved differently from the other two measures during the month.
Six industries reported employment increases, including transportation and warehousing, retail trade, real estate and rental and leasing, accommodation and food services, utilities, and wholesale trade.
Seven industries reported employment decreases, including construction, health care and social assistance, and educational services.
The Employment Index measures reported changes in workforce conditions among surveyed businesses. It does not directly represent the number of jobs added to the U.S. economy.
October’s reading nevertheless indicated a modest improvement in reported services employment conditions alongside continued overall sector expansion.
What October’s ISM Services Data Indicates
October’s ISM report showed that the U.S. services sector maintained its expansion despite slower growth in business activity and new orders.
The Services PMI remained above 50%, supported by positive readings across its major components. Employment improved, while supplier deliveries slowed and businesses continued reporting elevated input prices.
These measures provide separate perspectives on demand, workforce conditions, procurement, and operating expenses.
For businesses monitoring economic conditions, the October results suggest that services activity remained positive, although purchasing costs and delivery delays continued to require attention.
The report also highlights the importance of distinguishing slower expansion from contraction. Although several indexes declined from September, the main measures of business activity, new orders, and employment remained above their respective expansion thresholds.
Frequently Asked Questions
What was the U.S. Services PMI in October 2026?
The ISM Services PMI registered 54.5% in October 2026, compared with 54.9% in September. The reading marked the 28th consecutive month of services-sector expansion.
Why did the ISM Services Prices Index remain elevated?
The Prices Index registered 73% in October, indicating continued increases in prices paid by surveyed service-sector businesses. The index measures changes in business input prices rather than the consumer inflation rate.
Which service industries reported growth in October 2026?
Fifteen service industries reported growth, including transportation and warehousing, wholesale trade, information, retail trade, finance and insurance, and accommodation and food services. Construction and health care and social assistance reported contraction.
What does an ISM Services PMI above 50% indicate?
A Services PMI reading above 50% generally indicates expansion in the services sector, while a reading below 50% indicates contraction. October’s reading of 54.5% showed that activity continued expanding.
How did services-sector employment change in October?
The ISM Services Employment Index increased to 51.4% from 50.1% in September. The result marked the second consecutive month of expansion in reported services employment conditions.
