The ISM Services PMI is a monthly survey index of whether activity across U.S. service businesses is broadly improving or weakening. A reading above 50 generally signals expansion and one below 50 contraction—but the index is not a percentage growth rate. Its four components are Business Activity, New Orders, Employment, and Supplier Deliveries; the last works in reverse, with a reading above 50 indicating slower deliveries.
What the ISM Services PMI measures
The Institute for Supply Management (ISM) compiles the Services Business Survey from purchasing and supply executives. Respondents compare conditions in their own U.S. operations with the prior month. The panel is diversified across North American Industry Classification System (NAICS) categories, and responses are weighted by each industry’s contribution to GDP. Regional purchasing reports are separate and do not feed into the national report. ISM says survey responses are raw data and are not changed. ISM’s Services Report methodology describes the survey and its coverage.
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The resulting diffusion index summarizes the direction and breadth of change reported by respondents. It does not state how much service output, employment, or prices changed in percentage terms. ISM describes diffusion indexes as “convenient summary measures showing the prevailing direction of change and the scope of change.”
How the headline is calculated
The headline Services PMI is the equally weighted average of four diffusion indexes: seasonally adjusted Business Activity, seasonally adjusted New Orders, seasonally adjusted Employment, and Supplier Deliveries. Prices and Backlog of Orders are reported separately and do not enter the headline calculation.
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For 2026, ISM’s instructions calculate each unadjusted diffusion index to one decimal place, divide it by the projected seasonal factor, round the quotient to one decimal place, and then average the four component indexes. Rounding can make a hand-calculated result differ from ISM’s published figure. The 2026 seasonal factors took effect with January reports. ISM used X-13-ARIMA for revisions covering January 2023 through December 2025 and for projected 2026 factors; it says it will recompute the 2026 factors once actual data are known in early 2027. ISM’s seasonal-adjustment information explains the factors.
How to read the 50 threshold
- Above 50: More respondents generally report improvement than deterioration, indicating expansion in services activity.
- Below 50: More respondents generally report deterioration, indicating contraction.
- Near 50: The balance of reported change is close to even; the index is not a measure of the size of the change.
A move from 56 to 53, for example, would mean activity is still in expansion territory, but the survey signals a less broad or slower pace of improvement. The index does not mean output grew by 3 percent, nor does a one-point change translate into a fixed change in GDP.
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The Supplier Deliveries exception
Supplier Deliveries reverses the usual shorthand. Above 50 means delivery times are generally slowing; below 50 means they are generally speeding up. A higher reading therefore may reflect supply-chain delays rather than stronger service-sector performance. Consider it alongside the other components rather than treating every above-50 reading as favorable.
A separate threshold for the overall economy
ISM identifies 48.1 as the historical Services PMI threshold associated over time with expansion or decline in the overall economy. This is distinct from the 50 threshold used to interpret the services-sector index itself. It is a historical relationship, not a substitute for official GDP data or a prediction of a particular quarter’s result.
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What the September 2026 report showed
The latest report in the cited ISM data is for September 2026. Its headline Services PMI was 54.9, indicating expansion. The components show why the headline should be read as a summary rather than a complete account:
| Index | September 2026 | Change from August | What it indicates |
|---|---|---|---|
| Services PMI | 54.9 | Not stated in the cited September report summary | Services activity remained in expansion territory. |
| Business Activity | 56.5 | Down 5.2 points | Activity was expanding, though the index fell from August. |
| New Orders | 59.8 | Down 1.1 points | Demand remained in expansion for the 16th consecutive month. |
| Employment | 50.1 | Up 2.3 points | Employment returned to expansion, just above 50. |
| Supplier Deliveries | 53.2 | Up 1.9 points | Deliveries were slower for the 22nd consecutive month. |
| Prices | 74.0 | Up 1.4 points | More respondents reported higher rather than lower prices; prices paid had increased for the 112th consecutive month. |
These are diffusion-index readings, not percentage changes. In particular, Prices at 74.0 does not mean prices rose 74 percent or that inflation was 74 percent. It signals the breadth of respondents reporting price increases relative to decreases. Prices is an input-cost pressure measure, separate from the four components in the headline. The September 2026 ISM Services PMI report provides the monthly figures and commentary.
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ISM also said that a Services PMI of 54.9 corresponded, based on its past relationship with the overall economy, to a 2.1 percentage-point increase in real GDP on an annualized basis. This is ISM’s model-based historical relationship statement—not a BEA estimate or a direct measurement of September GDP.
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- Check the headline against 50 and the prior month. Separate whether activity is expanding or contracting from whether the index is rising or falling.
- Look at New Orders. This offers a demand signal and may help show whether current activity has incoming business behind it.
- Check Employment independently. A headline expansion does not guarantee that employment is expanding; compare its reading with 50.
- Interpret Supplier Deliveries in reverse. Above 50 means slower deliveries, not faster growth in service activity.
- Use Prices as context, not as an inflation rate. It tracks the breadth of reported price increases and is not part of the headline composite.
- Review industry detail where relevant. Component and industry readings can show whether a headline move is broad or concentrated.
When comparing the Services PMI with ISM’s Manufacturing PMI or another provider’s PMI, first check survey coverage, component definitions, weighting, and threshold conventions. Similarly named indexes do not necessarily measure the same mix of businesses or use the same construction.
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ISM sends its survey in the first part of each month, accepts responses through most of the month, and releases the report on the third business day of the following month. The report captures respondents’ assessments of changes at their organizations, not a direct census of the entire economy. ISM advises readers to consider it alongside other economic data when making decisions. It is one timely signal, not a stand-alone measure of GDP, hiring, or inflation.
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