ISM® PMI® Reports Roundup: April Services
Like with its Manufacturing counterpart last week, the ISM® Services PMI® Report for April was summarized as evidence of a sector’s resilience — but it’s hard to ignore the smoke from the Middle East.
If that smoke becomes fire depends on how long hostilities in Iran continue and the Strait of Hormuz is clogged, Steve Miller, CPSM, CSCP, Chair of the Institute for Supply Management® (ISM®) Services Business Survey Committee, said on Tuesday. But for now, the Services PMI® reading of 53.6 percent, with nine of 10 subindexes in expansion, is a win that should be taken.
“Though the PMI® was slightly below estimates, it was the 22nd straight month in expansion territory and remains above the 12-month average,” Miller told a conference call of reporters. “And the four subindexes (Business Activity, New Orders, Employment and Supplier Deliveries) that make up the composite number were directionally in line with expectations.”
53.6 on ISM Services is still well in expansion territory
— The Stock Up (@TheStockUp_) May 5, 2026
A tiny miss vs 53.7 estimate while Hormuz is closed, tariffs are elevated, and the macro backdrop is as noisy as it has been in years is actually a pretty resilient read
The services economy is not breaking 📈
There was a lot more to like in the data, particularly two readings that weren’t as bad as feared. The Supplier Deliveries Index was up just 0.6 percentage point to 56.8 percent (indicating slower delivery performance), lower than one would assume given the supply chain challenges stemming from the Iran war and inflation.
Meanwhile, the Prices Index repeated its March reading of 70.7 percent, the highest since October 2022 (70.7 percent). While no commodities were listed as down in price for a second straight month — and oil and petroleum products remain especially expensive — the index reading was a relief, considering the current manufacturing costs elevator.
However, Miller noted, the short-term trend isn’t good: “Many panelists stated that they have yet to see the impacts of petroleum price increases,” he said, “so we expect to see continued elevated readings for the Prices Index for several months, regardless of when the conflict in Iran ends, due to these costs working their way through global supply chains.”
Another dynamic has the services sector’s smoke alarm blinking — product shortages. Oil companies have issued warnings on fuel. And a Services Business Survey Committee respondent raised worries about fertilizer, a harbinger for an Agriculture, Forestry, Fishing & Hunting industry that contracted in April.
“There are two key questions based on how long the war lasts,” Miller said. “How long will the higher costs continue? And will they eventually lead to shortages, given events in the Strait of Hormuz? From that perspective, the Supplier Deliveries and Prices indexes being flat in April are good signs, but that hinges on not having additional escalation.”
On May 5, the #GDPNow model nowcast of real GDP growth in Q2 2026 is 3.7%: https://t.co/jQesJjjs9w. #ATLFedResearch
— Atlanta Fed (@AtlantaFed) May 5, 2026
Download our EconomyNow app or go to our website for the latest GDPNow nowcast: https://t.co/22GE10Xw53. pic.twitter.com/zkNMXHseq2
Prices had an indirect impact on the New Orders Index, which had its largest monthly drop (7.1 percentage points) in three years, to 53.5 percent.
Miller said that it is likely a correction after companies stepped up buying in March to get ahead of disruptions and/or tariffs. Still, a panelist in Management of Companies & Support Services wrote, “The war has caused many banking customers to back off equipment purchases and other spending. Just as the recovery was underway, it is now turning off. Not a good thing.”
The other demand gauges were positive, as the Business Activity (55.9 percent), backlog of Orders (53 percent) and New Export Orders (52.1 percent) stabilized or reversed March slides.
“The ongoing commentary that increased ordering was related to getting ahead seems to have had a broader effect in March than in April,” Miller said. “That number likely reflects a post-surge pullback.”
The only subindex in contraction territory in April is typically the one practitioners and economists don’t want to see below 50 percent — the Employment Index. The reading of 48 percent was a 2.8-percentage point improvement, echoing the mixed results in the federal Job Openings and Labor Turnover Survey (JOLTS) data for March, released earlier on Tuesday.
The ISM® PMI® Reports roundup:
Bloomberg: ISM Services Prices Paid Unchanged as U.S. Job Openings Fall Slightly. “(The Prices Index) was no change at 70.7 percent,” analyst Michael McKee said. “That’s a very high number, but at least that it didn’t go up, I suppose, is the good news. … The Employment Index comes in a little stronger but still under 50 percent, at 48 percent. (That’s) an input into people’s models for Friday’s jobs report.”
CNBC: Job Openings and Labor Turnover Comes in at 6.86 Million; New Home Sales Rise to 682,000. “If we look at (the New Orders Index), very light here,” analyst Rick Santelli said. “We were expecting 57 percent and change, (but it was) 53.5 percent — that would be the second-weakest of the year, outside of January’s 53.1 percent.”
MarketWatch: This Big Part of the Economy Was Stung by Iran War, But It Hasn’t Slowed Down Much. “(B)usinesses still grew at a fairly robust pace even as they turned more cautious. … The huge services side of the economy is the best barometer of growth. What it shows is the U.S. is still in expansion mode despite the stress of the Iran conflict, higher oil prices and rising inflation.”
Reuters: U.S. Service Sector Growth Cools as Order Growth Drops by Most in Three Years. “The New Orders Index fell to 53.5 percent from a three-year high of 60.6 percent in March, with the 7.1-point drop being the largest since March 2023. Cost pressures did not abate either, as the (Prices Index) sat unchanged at 70.7 percent, matching a level last seen in October 2022 when the post-pandemic inflation wave was just beginning to abate.”
The US ISM Services PMI inched down to 53.6 in April of 2026 from 54 in the previous month, loosely aligned with market expectations of 53.7, but remained firmly above averages from the previous year.
— Chamil R. Tennekoon (@chamilravinda) May 5, 2026
The Wall Street Journal: U.S. Services-Sector Activity Continued to Expand in April. “Economists polled by The Wall Street Journal expected a reading of 54.0 percent. The Prices Index held steady at 70.7 percent in April from March, the highest figure since October 2022. The Supplier Deliveries Index also indicated slower performance compared with March, the survey said.”
In case you missed last week’s ISM® PMI® Reports Roundup on the release of the April ISM® Manufacturing PMI® Report, you can read it here. Also, the ISM® Supply Chain Planning Forecast for the manufacturing and services sectors will be released on May 15.
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/ByMuratDeniz)