U.S. ISM Services Index (March 2026)

ISM Services Index pulls back in March

• The ISM Services index fell by 2.1 points to 54.0 in March. Growth was slightly less broad-based across industries, with 13 out of 18 reporting expansions, down from 14 in February.
• Following a surge in February, new orders continued to improve in March, increasing by 2.0 points to 60.6. The supplier deliveries index also edged higher, rising by 2.3 points to 56.2. Readings above 50 indicate slower deliveries, which is consistent with firmer demand and rising new orders, but could also be indicative of supply chain bottlenecks. 
• On the other hand, business activity dropped by 6 points to 53.9, breaking a five-month streak of gains.
• International trade indicators were mixed. New export orders declined, while imports rose during the month. Although both indexes remain higher than they were a year ago, the export orders index is barely above the threshold that separates contraction from expansion, signalling ongoing headwinds and uncertainty in the international trade sector.
• After mostly easing since October 2025, the prices index spiked by 7.7 points to 70.7 in March – the highest level since October 2022 – amid surging oil and fuel prices. The employment subcomponent meanwhile cooled off sharply, declining by 6.6 points to 45.2 and moving into contractionary territory for the first time since November 2025.

Key Implications

• Today’s report suggests the services sector is still expanding at a solid pace, but clouds may be gathering on the horizon, as business activity and employment softened, while the prices index rose. While tariff concerns appear to have moved to the back burner for now, survey respondents flagged new challenges related to the war in Iran, including Middle East shipping disruptions and higher fuel costs.
• Alongside last week’s strong payrolls report, today’s evidence of rising price pressures reinforces the view that the Fed is likely to stay on hold for now as it assesses the economic effects of higher oil prices. The window for further rate cuts later this year may be narrowing, particularly if labor market momentum persists and energy prices remain elevated. 

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