ISM® PMI® Reports Roundup: March Services

By indicating resiliency amid potential threats around the globe, the ISM^® Services PMI^® Report for March typified the sector’s performance in recent years.

With yellow flags — mixed results on demand, an Employment Index in contraction and the highest Prices Index reading in nearly four years — in the data, the headline number was below expectations but still strong: The Services PMI^® registered 54 percent, a 21st consecutive month of expansion.

Despite uncertainties from tariffs and the ongoing Middle East conflict, especially the latter’s impact on fuel prices, the U.S. services sector should remain durable, Steve Miller, CPSM, CSCP, Chair of the Institute for Supply Management^® (ISM^®) Services Business Survey Committee, told a conference call of reporters on Monday.

ISM Services PMI 54 vs 56.1 prev.
Services expanding at a slower pace.
Economy still holding up.

— Harry *KX* Yotis - GRC (@GRCapital4) April 6, 2026

“I don’t think we’re seeing weakness in the services sector at all,” he said. “I was surprised by the Employment Index number but … maybe it’s a short-term shock. Reduced travel and tourism may have impacted employment, or maybe companies are being more conservative with the fear of the unknown. But overall, we’re seeing economic strength.”

The Employment Index reading of 45.2 percent is a 6.6-percentage point decrease from the February figure and the lowest reading since December 2023 (43.5 percent). Other recent jobs data has been more positive, but as Miller has noted before, ISM’s Employment Index tends to be a leading indicator.

Among companies surveyed, 10.7 percent reported increasing staff, down from 16.2 percent the previous month; 18.4 percent lowered head counts, up from 15.1 percent in February. That’s not the hiring record one would expect in a month when the New Orders Index registered 60.6 percent; the April data will determine if it was an uncertainty-induced one-off.

Was immigration a factor? A Business Survey panelist noted that the company’s attendance, not head count, decreased in March, and another wrote, “Lower employment in the U.S., higher in India and other low-cost geographies; H-1B visa salaries have increased as well.”

The other eye-popping figure was the Prices Index, which began catching up with its Manufacturing counterpart in March, ballooning 7.7 percentage points to 70.7 percent, the highest reading since October 2022 (70.7 percent). Like in the Manufacturing report, no commodities were listed as down in price.

Fuel, which is critical to the delivery and provision of services, is the biggest cost driver; Miller said that most of the index increase is due to price pressures stemming from the Middle East conflict. Also cited: volatility in metals and lumber markets.

Purchasing managers report general service-sector resilience & adaptability to self-inflicted policy supply shocks (led by AI-related activity and consumer spending), but fear and uncertainty related to the Middle East conflict leading to renewed inflation and supply disruptions pic.twitter.com/hF2DORI6If

— Gregory Daco (@GregDaco) April 6, 2026

What’s more, many panelists noted that higher fuel costs had yet to flow through to other commodities, so the Prices Index could continue to increase, Miller said. In response, many companies stocked up to withstand supply disruptions or get ahead of price increases, evident in readings for the Inventories (54.8 percent) and Inventory Sentiment (54.3 percent) indexes.

“From a services perspective, you’re talking about utilities, construction and a lot of products that include petroleum, as well as in the some of the products that have to be shipped, which impacts Accommodation & Food Services,” he said. “So, I think we’re going to see an impact across multiple industries in the short term.”

Regarding demand, while the New Orders Index figure was strong, the Business Activity (53.9 percent), Backlog of Orders (53.6 percent) and New Export Orders (50.7 percent) indexes indicated slower growth, decreasing by a combined 14.8 percentage points. Weaker demand growth was considered a yellow flag in the ISM^® Manufacturing PMI^® Report for March.

Miller said those indexes will be ones to watch in April, especially amid geopolitical and trend uncertainties that test business resiliency. Luckily for the U.S. services sector, that’s one thing it has shown ample supply of in recent years.

“Nine of the 10 subindexes are still in expansion territory, and where there was still commentary on tariffs, it was much less than three or four months ago,” he said. “(The biggest) uncertainty is on the conflict — when it will end and how much damage is done. If that keeps energy costs high, everyone in the services sector will experience that.”

The ISM^® PMI^® Reports roundup:

Bloomberg: Growth Slows at U.S. Service Providers as Price Gauge Surges. “The war is also fueling uncertainty about the economic outlook, which may be prompting more caution among companies. The ISM (Employment Index) slumped 6.6 points, one of the biggest monthly declines since the (coronavirus) pandemic, to 45.2 percent.”

CNBC: ISM Services PMI^® Comes In at 54% Versus 55.4% Estimated. “We’d really rather have (the Prices Index) go down,” analyst Rick Santelli said. “This is not only the 16th (consecutive) reading that is above 60 percent — this one is above 70 percent. At 70.7 percent when we were expecting 67 percent, this would equal where we were in October 2022. To find a higher number, you’re going back to August 2022.”

MarketWatch: Economy Jolted by Iran War. Inflation Bubbles Up and Service Companies Curb Employment. “Business leaders were cautiously optimistic when the new year began, especially after the Supreme Court struck down President Donald Trump’s reciprocal tariffs on goods imported to the U.S. as unconstitutional. Yet fresh uncertainty has been caused by the replacement tariffs and higher inflation associated with the Iran war. The economy is still growing, but new headwinds suggest further progress is limited for now.”

Honestly guys wake me up when ISM services drops back to 50. Most everything else is noise.

— Oliver Renick (@OJRenick) April 6, 2026

Reuters: U.S. Service Sector Cools in March; Price Paid Measure Highest in 3½-Years. “(The Prices Index) remained elevated, with businesses blaming rising costs from President Donald ‌Trump’s broad ⁠tariffs, which have since been struck down by the U.S. Supreme Court. But Trump responded by imposing a global tariff for up to 150 days. … The anticipated inflation fallout from the conflict has greatly diminished the odds of an interest rate cut this year.”

The Wall Street Journal: U.S. Services Sector Faced Heightened Inflation in March. “Economists are vigilant for signs that energy-price increases caused by the Iran war are spreading into other industries and pushing up prices more broadly. March inflation data are due out Friday from the Labor Department.”

In case you missed last week’s ISM^® PMI^® Reports Roundup on the release of the March ISM^® Manufacturing PMI^® Report, you can read it here. For the most up-to-date content on the reports under the ISM^® PMI^® Reports umbrella, use #ISMPMI on X, formerly known as Twitter.

(Photo credit: Getty Images/SDI Productions)