US September services PMI slips to 54.9 as price index hits four-year high
In short
The US services sector expanded for a 27th straight month in September, but the ISM services PMI slipped 0.5 point to 54.9 from 55.4 in August. The prices index rose to 74.0, its highest since July 2022, with ISM's survey chair citing tariffs and fuel costs as the most-cited strains on supply chains. Employment returned to expansion at 50.1, while new export orders fell into contraction.
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The US services sector continued to expand in September, but at a slower pace, according to the Institute for Supply Management. The services purchasing managers' index came in at 54.9, down 0.5 point from 55.4 in August, ISM said on October 5 local time. A reading above 50 indicates expansion, and the sector has now stayed above that line for 27 consecutive months. Yonhap reported the figure was close to the 55.0 consensus compiled by Dow Jones, while Asia Economy put market forecasts at 55.0 to 55.2. [ 1 , 2 , 3 , 4 ]
Cost pressure intensified. The prices index, which tracks what companies pay for materials and services, rose to 74.0 from 72.6, the highest level since July 2022, when it stood at 74.5, Asia Economy reported. Yonhap and Chosun Ilbo also reported the four-year high. According to Asia Economy, the prices index has exceeded 70 in six of the past seven months and has stayed above 60 for 22 consecutive months. [ 1 , 2 , 3 , 4 ]
Underlying demand remained firm. The business activity index fell to 56.5 from 61.7, and new orders eased to 59.8 from 60.9, still a 16th straight month of expansion, Asia Economy reported. The employment index rose to 50.1 from 47.8, returning to expansion after three months; some companies said they were filling vacancies left by retirements or promotions, while others said they were reorganising on the back of efficiency gains from artificial intelligence tools. Order backlogs rose to 56.6 from 55.6, the highest since July 2022, while new export orders fell to 46.9 from 56.3, moving into contraction for the first time in eight months. [ 4 ]
Supply chains remained strained, with the supplier deliveries index rising to 53.2 from 51.3 — a 22nd consecutive month of delivery delays, Yonhap and Asia Economy reported. Steve Miller, who chairs the ISM services survey committee, said tariffs and fuel costs were the factors most often cited by respondents as affecting their supply chains, and that fuel was mentioned twice as often as any other single factor. [ 1 , 4 ]
Asia Economy said foreign media attributed the higher cost pressure to strong domestic demand combined with energy price increases and supply-chain disruption tied to conflict in the Middle East, and noted that ISM's manufacturing survey published the previous week showed its prices index jumping to 77.9 from 71.1. Matthew Martin, a senior US economist at Oxford Economics, said the prices index is clearly rising and that supply-chain stress and growing order backlogs also suggest higher price pressure, adding that solid growth means the US economy can absorb further tightening. [ 4 ]
Why it matters
Rising price pressures in services, after a jump in the ISM manufacturing prices index the previous week, point to renewed cost pressure in the US economy. One economist cited by Asia Economy said the economy can withstand further tightening, framing the data as a factor in US interest-rate expectations that matter well beyond the United States.
Key facts
- The ISM services PMI was 54.9 in September, down 0.5 point from 55.4 in August and above the 50 level that separates expansion from contraction. [ 1 , 2 , 3 , 4 ]
- The services prices index rose to 74.0 from 72.6, the highest reading since July 2022, when it was 74.5. [ 1 , 4 ]
- The business activity index fell to 56.5 from 61.7, and new orders eased to 59.8 from 60.9, still a 16th straight month of expansion. [ 4 ]
- The employment index rose to 50.1 from 47.8, returning to expansion after three months; some firms cited backfilling vacancies, others reorganisation using AI tools. [ 4 ]
- Supplier deliveries rose to 53.2 from 51.3, marking 22 consecutive months of delivery delays. [ 1 , 4 ]
- New export orders fell to 46.9 from 56.3, contracting for the first time in eight months. [ 4 ]
- ISM services survey chair Steve Miller said tariffs and fuel costs were the factors most cited as affecting supply chains, with fuel mentioned twice as often as any other single factor. [ 1 , 4 ]
- Oxford Economics senior US economist Matthew Martin said the price index is clearly rising and that the US economy can withstand further tightening given solid growth. [ 4 ]
Confirmed by several sources
- The ISM's September services PMI was 54.9, down 0.5 point from 55.4 in August, holding the expansion streak at 27 months. [ 1 , 2 , 3 , 4 ]
- The ISM services prices index rose to its highest level in more than four years. [ 1 , 2 , 3 , 4 ]
- The US Institute for Supply Management published the September survey results on October 5 local time. [ 1 , 2 , 3 , 4 ]
- Cost and supply-chain pressure was attributed by ISM's survey chair to tariffs and fuel costs. [ 1 , 4 ]
Still unclear
- Why new export orders dropped sharply, to 46.9 from 56.3. Only Asia Economy reports the export-order figure and the documents offer no explanation for the decline; it is a single-source number.
- Whether the price data will shift US interest-rate expectations. The documents cite only one economist, Matthew Martin of Oxford Economics, and report no signal from the Federal Reserve or other officials.
- How the reading compared with market forecasts. Yonhap cites a Dow Jones consensus of 55.0, while Asia Economy cites a market forecast range of 55.0–55.2; the two outlets give slightly different expectations from different providers.
What local media are saying
Timeline, local time
- ISM releases the September services survey, showing a PMI of 54.9 and a prices index of 74.0. [ 1 , 2 , 3 , 4 ]
- Yonhap publishes its report from New York on the September services PMI and cost pressures. [ 1 ]
- Chosun Ilbo publishes Korean- and Japanese-language summaries of the same ISM data. [ 2 , 3 ]
- Asia Economy publishes a detailed breakdown of the components, including employment, order backlogs and export orders. [ 4 ]