U.S. ISM Services Index (October 2026)

ISM Services eases again in October, while price pressures remain elevated 

• The ISM Services PMI fell 0.4 points to 54.5 in October from 54.9 in September, marking a second consecutive monthly decline. Despite the pullback, the index remained in expansionary territory for a 28th straight month. 
• Business activity and new orders both moderated further, indicating weaker demand. The business activity index fell 2.7 points to 53.8, while new orders dropped 3.9 points to 55.9, the largest monthly decline among the sub-indexes.  
• The employment index improved by 1.3 points to 51.4, remaining in expansionary territory for a second consecutive month.  
• Price pressures eased only marginally, with the prices paid index falling 1.0 point to a still-elevated 73.0. The index has exceeded 70 in seven of the past eight months. 
• Supplier deliveries rose 3.5 points to 56.7, indicating a further lengthening of delivery times. Meanwhile, inventories fell 2.4 points to 55.4, though the reading continued to indicate that firms were building stocks. 
• New export orders posted the largest monthly increase, rebounding 8.3 points to 55.2 after September’s contraction. Backlogs rose 1.4 points to 58.0, marking a ninth straight month of growth, while imports increased 1.3 points to 54.2.   

Key Implications

• The modest decline understates the softening in services in this month's release, as slower supplier deliveries helped support the composite index. The key indicators of current demand, such as new orders, registered a notably larger decline. Still, improving employment, rising backlogs, and a rebound in export orders suggest the sector is only losing speed and not stalling. 
• But the inflation signal offers little reassurance. Prices paid edged down from September’s high but remained above 70, while supply bottlenecks appear to be adding to the risk of persistent cost pressures. With services still expanding and hiring improving, the report provides little evidence that cost pressures are easing decisively and keeps the risk of further Fed tightening in focus. 
    

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