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Outbyte Driver Updater FREEFix the driver behind crashes, sound loss and screen glitchesFind Drivers →Outbyte PC Repair FREEClear out junk files and repair common Windows errorsFree Scan →In ISM’s September 2026 Services Business Survey, Construction was reported in contraction for a second consecutive month. Steve Miller, chair of the survey committee, said higher capital costs would have a direct impact on residential housing. The report offers survey findings and industry commentary—not a measured estimate of how much interest rates have changed home sales or construction.
What ISM reported for September
The overall ISM Services PMI registered 54.9% in September 2026, down from 55.4% in August. ISM treats readings above 50 as expansion and below 50 as decline for the applicable index; Supplier Deliveries is the exception. The 54.9% figure therefore indicates expansion in the overall services sector, not growth in every industry surveyed.
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Within that broader report, ISM said Construction reported contraction for a second consecutive month. It also identified Construction as the only industry reporting lower new orders for a second month in a row. ISM did not provide a numerical Construction-specific index value in the cited material, so the finding should be read as the report’s industry-level description, not as a construction-output statistic.
Overall services readings are not construction readings
The report’s Business Activity Index was 56.5% and its New Orders Index was 59.8%. Both are overall Services measures. They do not contradict the Construction finding: a broad sector can expand while one industry within it reports contraction. These figures are not measures of housing sales, building permits, housing starts, or construction spending.
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What Miller said about housing and financing costs
Steve Miller, CPSM, CSCP, was chair of ISM’s Services Business Survey Committee when the September report was issued. In ISM’s October 6, 2026 coverage, he said higher capital costs would affect investment and “definitely have a direct impact for residential housing in the construction industry.” He also said, “That’s an area where we’re already seeing an impact (of increased product and financing costs),” and added that he expected it to continue.
Those remarks are Miller’s assessment of how capital, product, and financing costs may affect residential construction. They are not a quantified estimate of the effect of mortgage rates on home sales, building activity, or housing prices.
What survey respondents said about mortgage rates
The ISM release included respondent comments linking mortgage rates with housing-market conditions. One respondent said, “Home sales are slowing as mortgage rates increase and inventory shrinks.” Another said, “Interest rates continue to drive buyers out of the market.” These comments report respondents’ experiences or interpretations; they are not independently verified causal findings by ISM.
The survey material does not isolate interest rates from other possible influences or measure the size of their effect. In particular, the home-sales comment mentions both mortgage rates and shrinking inventory, so it should not be read as proof that rates alone explain slower sales.
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How to interpret the contraction finding
ISM’s report is a survey of U.S. services operations. Its Construction classification and contraction wording describe reported survey conditions within that framework. They should not be substituted for national data on residential construction or housing-market transactions. The useful takeaway is narrower: the overall Services PMI remained in expansion, while Construction was reported in contraction for a second consecutive month and was the only industry with lower new orders for a second month running.
Sources: ISM’s September Services roundup, October 6, 2026; ISM’s September 2026 Services PMI release, October 5, 2026.
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