U.S. services activity continued to expand in September 2026, but at a slower pace than in August. The Institute for Supply Management’s Services PMI fell from 55.4 to 54.9, remaining above the 50 mark that generally signals expansion. Meanwhile, its Prices Index climbed to 74.0, the highest reading since July 2022. That index tracks businesses’ reports of prices paid for inputs; it is not a measure of consumer inflation.
What changed in September?
The headline Services PMI declined 0.5 percentage point, to 54.9 from 55.4 in August. ISM’s September report describes continued expansion, not a contraction. The result was slightly below the 55.2 median forecast of economists polled by Reuters, as reported by Reuters.
| ISM index | September 2026 | August 2026 | How to read it |
|---|---|---|---|
| Services PMI | 54.9 | 55.4 | Above 50 generally signals expansion. |
| Business Activity | 56.5 | 61.7 | Above 50 indicates growth in reported activity; the measure fell 5.2 points. |
| New Orders | 59.8 | 60.9 | Above 50 indicates growth in reported orders; the measure fell 1.1 points. |
| Employment | 50.1 | 46.4 | Just above 50 after two months below it. |
| Supplier Deliveries | 53.2 | 51.3 | Above 50 indicates slower deliveries. |
| Prices | 74.0 | 72.6 | Reports of input prices rising; highest since July 2022. |
| Backlog of Orders | 56.6 | not stated (ISM) | Highest since July 2022. |
| New Export Orders | 46.9 | not stated (ISM) | Below 50. |
Values are diffusion-index readings from ISM’s September report. The August values for Backlog of Orders and New Export Orders are not stated in the cited report summary.
Why did the Services PMI fall?
The slowdown reflected weaker readings in Business Activity and New Orders, though both remained well above 50. The survey therefore points to slower growth in reported activity and orders, rather than an outright decline across the services sector.
The composite does not simply average every published component. ISM calculates it from four equally weighted indexes: Business Activity, New Orders, Employment and Supplier Deliveries. Because Supplier Deliveries is reverse-interpreted, a reading above 50 means deliveries are slower, not that supplier performance is improving. In September, that index rose to 53.2 from 51.3.
Why are services prices rising?
ISM’s Prices Index rose 1.4 points to 74.0, and prices paid by services organizations had increased for the 112th consecutive month. In September, 50.3% of respondents reported higher prices, 47.5% reported no change and 2.2% reported lower prices. These are survey responses about prices businesses pay for materials and services—not consumer prices, the rate of inflation, or the share of household budgets getting more expensive.
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ISM’s survey establishes that respondents widely reported higher input prices, but it does not by itself identify the causes. Reuters connected the pressure with fuel costs and supply-chain strain in its October 5 coverage, citing its sources; that explanation should be understood as Reuters’ reporting, not a causal finding from the ISM index.
What do employment and orders suggest?
The Employment Index returned to expansion territory at 50.1 after two months below 50. The reading is close to the threshold and does not state how many jobs were added. Backlog of Orders rose to 56.6, its highest level since July 2022, while New Export Orders fell to 46.9, below the expansion threshold.
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ISM Services Business Survey Committee Chair Steve Miller said the combination of order backlog and continued strength in new orders meant some companies had “no alternative than to add workers.” That is Miller’s interpretation of the survey pattern, not a claim that all employers will hire. ISM’s October 6 roundup also reported that some panelists described AI-related restructuring or difficulty filling roles requiring AI qualifications; those comments do not establish AI as a broad cause of employment changes.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.What the ISM Services PMI can—and cannot—tell you
The survey covers U.S. operations reported by a nationwide panel of purchasing and supply executives across industries classified using NAICS. Respondents report whether conditions changed from the preceding month, and results are weighted by each industry’s contribution to GDP. The diffusion indexes indicate the breadth and direction of reported change; they are not direct measures of output growth, job totals or price inflation.
ISM says readings above 50 generally indicate services-sector expansion and readings below 50 generally indicate contraction. It also identifies 48.1 as the historical threshold that, over time, generally corresponds to expansion in the overall U.S. economy. That broader historical relationship is distinct from the usual 50 threshold for interpreting the services indexes.
Miller said ISM’s past relationship between the Services PMI and the overall economy means September’s 54.9 reading “corresponds to a 2.1-percentage point increase in real gross domestic product (GDP) on an annualized basis.” This is ISM’s historical relationship interpretation, not a GDP measurement or an official GDP forecast.
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