ISM® PMI® Reports Roundup: August Services
With summer winding down, high temperatures were all over the ISM® Services PMI® Report for August — most notably red-hot, across-the-board demand highlighted by the Business Activity and New Orders indexes hitting multiyear highs.
However, the celebration on Thursday was somewhat muted by the heat staying on the Prices Index, which reached its highest level in nearly four years. And there was a nagging, burning question: When will demand translate into hiring?
The Services PMI® of 55.4 percent, an increase of 1.3 percentage points compared to July, was boosted by a combined 19.8-percentage point gain in the Business Activity and New Orders indexes (which directly factor into the PMI® calculation) as well as the Backlog of Orders, New Export Orders and Imports indexes (which do not).
The US ISM Services report was particularly strong, with nearly all activity and price subcomponents rising robustly (employment being the exception). Overall business activity expanded to a six-month high, new orders were the highest level in over three years, and prices paid at a four-year peak.
— Mohamed A. El-Erian (@elerianm.bsky.social) 7:41 AM · Sep 3, 2026
[image or embed]
That demand had the water in the services-sector glass boiling, but the concerns over prices and employment kept it only half-full.
“Based on some of the conversations and what we’ve seen over the last several months, the reluctance in hiring and the slow hiring is probably related to trying to manage economic outcomes with increased pricing,” Steve Miller, CPSM, CSCP, Chair of the Institute for Supply Management® (ISM®) Services Business Survey Committee, told a conference call of reporters on Thursday.
“You have only a limited number of line items to manage from a cost perspective. When you can't manage the input costs, the input costs are consistently going up. The labor lever is a common one that services companies are pulling.”
The Employment Index registered 47.8 percent, an increase of 0.4 percentage point compared to the previous month but in contraction territory for the 13th time in the last 18 months. As this space mentioned last month, the last time that happened is never a good timeframe for historical comparisons: 2008-10.
Earlier this week, the August private payrolls data from ADP missed expectations. Companies appear to be making do with as few workers as possible as long as customers don’t complain, Miller said on ISM’s LinkedIn Live broadcast on Thursday, and two Services PMI® data points appear to bolster that theory.
The Backlog of Orders Index (55.6 percent) reached a six-month high, and some Business Survey panelists indicated that high backlog levels were due in part to lower staffing levels at their companies. Meanwhile, the Supplier Deliveries Index (51.3 percent) decreased for a fourth straight month, indicating still slower but better lead times.
“Companies are being reluctant to rehire, even with the stronger business,” Miller told reporters. “They’re thinking they can go a little longer without refilling a position, that it won’t be a crisis if it stays open for a while.”
ISM Services prices paid at a fresh four-year high pic.twitter.com/eqJP90nGfY
— Kevin Gordon (@KevRGordon) September 3, 2026
The Prices Index offered no relief; the reading of 72.6 percent is a 2.3-percentage point increase compared to July and the highest since October 2022 (72.6 percent). While there seemed to be less volatility — the commodities listed as up or down in price both decreased — the index broke the 70-percent threshold for the fifth time in six months.
“Petroleum-related products like diesel and gasoline were reported up in price in August,” Miller said. “Graphics processing units — those are used heavily in AI — and steel were added as commodities in short supply, along with memory for its eighth month in a row. None of that is great news for those involved in supplying AI capacity.”
With continuing uncertainty in the Middle East sending oil prices to a six-week high and new tariffs turmoil with Canada, Miller said on LinkedIn that he does not expect the Prices Index to return below 70 percent until next year.
This comment from a panelist in Construction perhaps summed up the non-demand dynamics weighing on services businesses: “The bond market pushed 30-year mortgage rates up to 6.67 percent, reducing affordability and moving prospective buyers back to the sidelines. The new-build housing market continues to slow with the selling season coming to a close and the start of the new school year. Rate buydowns and discounts have become the norm instead of the tool to drive traffic.”
Bonds have been selling off worldwide, and there have been signals from the Federal Reserve that an interest rate hike could be coming. Those developments could have big impacts on borrowing costs, which some Business Survey panelists indicated have been a capital-expenditures headache in recent months.
The Business Activity Index (61.7 percent) had its highest reading since hitting 62.7 percent in November 2022, and the New Orders Index registered 60.9 percent, its highest level since February 2023 (61 percent). Services demand continues to hum.
But the factors outside the sector are giving companies and procurement organizations a lot to unpack.
The ISM® PMI® Reports roundup:
Bloomberg: U.S. Services Pick Up, Price Gauge Jumps to Four-Year High. “High prices could be one reason businesses are reducing headcounts. ISM’s employment gauge has signaled contraction in five of the last six months. Supplier delivery times remained in expansionary territory, but the group’s measure fell to the lowest level in nearly a year, a possible sign that bottlenecks are slowly easing.”
CNBC: ISM Services PMI® Comes In at 55.4% in August, Beating Expectations. “For August: 55.4 percent, better than expectations,” analyst Rick Santelli said. “That would be the best read since May of this year. Now, if you look at (the Prices Index), it’s also higher than expected, but in this category, that’s not a good thing, hotter prices. It’s 72.6 percent, and we were looking at a number around 70. ... So, that is a big bump-up that equals where we were in the summer of 2022.”
MarketWatch: The U.S. Economy Powers Up as Summer Winds Down, But It’s Not Free of Trip Wires. “New orders — a sign of future sales — rose to the highest level in 3½ years. Business activity was strong almost across the board. Businesses are holding the line on hiring new employees, however, in no small part to keep costs down. Tariffs and higher oil prices have increased their expenses and added other headaches.”
August @ISM Services PMI rose to 55.4 vs. 54.1 est. & 54.1 prior; new orders up to 60.9 vs. 57.2 prior; employment up to 47.8 vs. 47.4 prior; prices paid up to 72.6 vs. 70.3 prior pic.twitter.com/DADmRmw1IQ
— Liz Ann Sonders (@LizAnnSonders) September 3, 2026
Reuters: Strong Demand Boosts U.S. Services Sector Activity in August. With demand showing no signs of cooling, supply chains remained stretched last month. ... Despite the surge in orders, services sector employment remained subdued last month. Economists say businesses are reluctant to add to head counts because of policy uncertainty.
The Wall Street Journal: U.S. Services-Sector Activity Expanded Again in August. “Economists polled by The Wall Street Journal expected the reading to hold steady month-over-month. … The New Orders Index registered 60.9 percent, up from 57.2 percent in July. The Employment Index (was) in contraction territory for a second consecutive month.”
In case you missed last week’s ISM® PMI® Reports Roundup on the release of the August 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/Ilkercelik)