ISM® PMI® Reports Roundup: October Services
Amid a wave of change in the country this week, the ISM® Services PMI® Report for October revealed calm waters for the sector that makes up most of the U.S. economy.
Like its Manufacturing counterpart, the Services PMI® released on Wednesday revealed month-over-month steadiness: The composite index registered 54.5 percent, a decrease of just 0.4 percentage point and barely missing analysts’ expectations.
If that data had any impact on the markets, it was drowned out by the midterm elections delivering both houses of Congress to the Democratic Party, which helped lead to a gain of 1,500 points in the Dow Jones Industrial Average and boosts in the Nasdaq and S&P 500 indexes.
ISM Services slightly softer at 54.9 in October, with a notable easing in new orders ... prices paid eased only a touch while employment continued to move higher https://t.co/7a134tjoNg
— Kevin Gordon (@KevRGordon) November 4, 2026
The longer-term impacts of the election on companies and supply chains will be dissected in the ISM® Supply Chain Planning Forecast to be released on December 16, as well as the annual economic outlook article in the January/February issue of Inside Supply Management®.
On Wednesday, the focus was on the issues continuing to vex supply chain practitioners and executives: commodities inflation and logistics/fulfillment challenges that seemed to intensify in October. Regarding the latter, labor help could be on the way, said Steve Miller, CPSM, CSCP, Chair of the Institute for Supply Management® (ISM®) Services Business Survey Committee.
“The principal challenges are persistent price pressures and supply limitations, while the modest employment improvement is a welcome two-month trend,” Miller told a conference call of reporters.
The Prices Index provided little relief in October, down just 1 percentage point to 73 percent, exceeding 70 percent for the seventh time in eight months and above 60 percent for the 23rd consecutive report. Nineteen commodities were reported as up in price, including fuel for a ninth straight month; none were listed as down in price.
Fuel surcharges and whether companies would pass them to customers was a topic of panelists’ comments, Miller said: “That surprised me in the report. One comment discussed not passing the surcharges through and taking the margin hit because it could be temporary.”
He continued, “So, oil prices may be moderating — staying where they are or dropping a little bit. There are still embedded costs in supply chains that I think will still flow through in price, at least for the next several months, even if oil prices begin to decline.”
While demand was a mixed bag in October, the Backlog of Orders Index increased 1.4 percentage points to hit 58 percent, its highest reading since July 2022. Fulfillment frustration was also evident in the Supplier Deliveries Index, which was up 3.5 points to 56.7 percent, indicating longer lead times.
The services economy is still growing. It's just stopped sprinting. ISM services fell to 54.5, under the 54.8 forecast. New orders dropped from 59.8 to 55.9 (ISM). Above 50 is still expansion. Breather or trend? The next jobs report will say.
— Feniks Montgomery (@FeniksKnowsBest) November 4, 2026
Combined with the Prices Index, Miller said, this combination of readings hasn’t been seen in the Services data since the coronavirus pandemic recovery, “when extreme constraints on supply and capacity drove up prices,” he said.
The silver lining could be in the Employment Index (51.4 percent, up 1.3 points), which indicated expansion for a second straight month. Miller said that could be a sign that companies are boosting staffs to handle backlogs and logistics. The ADP private payrolls report released on Wednesday indicated 86,000 jobs added in October, most of them in the services sector.
“Continued demand and growing backlogs create pressure for additional staffing,” Miller said. “Supply conditions have become more difficult.”
Through the challenges, the sector remains resilient, Miller pointed out on ISM’s LinkedIn Live broadcast, noting that the October PMI reading is 0.2 percentage point above the 12-month average of 52.3 percent, and the 15 industries that reported growth is one of the highest totals in the last three years.
In the meantime, the environment is likely most typified by a panelist in Educational Services, who wrote, “Purchasing operations continue to be impacted by elevated costs for goods and services, particularly in construction, facilities maintenance, technology and contracted services. Ongoing uncertainty surrounding tariffs, labor availability and broader economic conditions continues to influence supplier pricing and procurement planning.”
The ISM® PMI® Reports roundup:
Bloomberg: U.S. Service Sector Grows at the Slowest Pace in Three Months. “Resilient consumer spending, a stable job market and strong business investment have supported demand for services throughout the year. But firms are also coping with mounting costs and delivery delays. … Supply chains have also been affected by tariffs and the Middle East conflict. (The Supplier Deliveries Index) jumped last month to the highest since April.”
CNBC: ISM Services PMI® Comes In at 54.5% in October, Below Estimates. “This is just a modest miss — I would say a miss that doesn’t matter very much,” analyst Steve Liesman said. He added, “The bottom line is the services sector remains above 50 percent, which shows growth in services as well as the economy. … The only are of concern is the one that’s been the area of concern: 73 percent on the (Prices Index), versus 74 percent (in September), down a tick but still definitely an elevated level.”
MarketWatch: The U.S. Economy Is Barreling Ahead — But There’s One Big Problem. “Most businesses are growing and seeing increased demand in a good sign for the economy, but it’s also a challenging time to manage costs and keep customers happy. As a result, companies are keeping a tight rein on hiring as part of an effort to keep their own costs down.”
Reuters: U.S. Services Sector Activity Cools Slightly in October; Inflation Remains Elevated. “The PMI® suggested the economy started the fourth quarter on solid footing, though economists expect a slowdown in activity, with consumer spending expected to pull back after back-to-back quarters of robust growth. Spending is seen in part curbed by high inflation, which is eroding household purchasing power.”
Services prices paid: 73. Above 70 in 7 of the last 8 months, per ISM. Firms say they haven't passed the full fuel and tariff costs through yet, and order backlogs just hit their highest since July 2022. More inflation is in the pipeline.
— Robert Sapp (@rsapp9472) November 4, 2026
The Wall Street Journal: U.S. Services-Sector Activity Expands Again in October. “Economists polled by The Wall Street Journal expected a reading of 54.8 percent. A reading above 50 indicates expansion, while one below 50 indicates contraction. The New Orders Index registered 55.9 percent, 3.9 percentage points below September’s figure of 59.8 percent. The Employment Index remained in expansion.”
In case you missed Monday’s ISM® PMI® Reports Roundup on the release of the October 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/Diem.ph)