ISM Services 55.4 and S&P Final 56.5 — the Two Surveys Disagree on Prices and Jobs

Fundamentals · 2026-09-03

ISM Services PMI 55.4 percent, up 1.3 and beating a 54.3 consensus, a 26th consecutive month of expansion; Business Activity 61.7, the highest since November 2022; New Orders 60.9, the highest since February 2023; Prices 72.6, the highest since August 2022 and a 111th straight month of increases; Employment 47.8, contracting for a second month and below 50 in 13 of the last 18; Backlog 55.6, Imports 56.3, Export Orders 56.3; S&P Global's final Services Business Activity Index 56.5, a 20-month high, with its Composite at 56.0, a 52-month high — but S&P reports input costs at their slowest since April 2025 and the fastest services hiring since January 2025, the opposite of ISM on both counts.

What Is This?

• What it is: Two independent surveys of the same sector released ninety minutes apart. S&P Global's final US Services PMI came out at 9:45am ET from a panel of about 400 companies, data collected 12-26 August. ISM's Services PMI followed at 10:00am ET, reported by committee chair Steve Miller. ISM's headline is an equal-weighted composite of exactly four subindexes — Business Activity, New Orders, Employment and Supplier Deliveries — so it decomposes precisely. S&P Global's headline is its Business Activity Index alone, and S&P states explicitly that it is not comparable with a headline manufacturing PMI figure.
• Why it matters: Services are roughly five times manufacturing in employment terms and dominate core inflation, which makes this the more consequential of the two PMI weeks. It lands one day before the August payroll report and eight days before August CPI, and six days after Warsh told Jackson Hole that the Fed's "predominant focus right now should be on prices."
• How to read it: Read them as two estimates of the same thing, because this month they disagree sharply. Where they agree — activity and new orders surging — treat it as established. Where they contradict each other, on employment and on prices, treat both as uncertain rather than picking the one that suits. And note that ISM's Supplier Deliveries is inverted: services deliveries got faster in August, which mechanically subtracts from the headline.

Want the full explainer? Economic News Events, Explained breaks down this release and every other one we cover, in plain English.

Summary

The ISM Services PMI registered 55.4 percent in August, up 1.3 points from July's 54.1 and comfortably above a 54.3 consensus. That is a 26th consecutive month of expansion, 1.7 points above the twelve-month average of 53.7, and the eighth straight month that twelve-month average has risen. On the demand side the report is emphatic. Business Activity jumped 2.6 points to 61.7, its highest reading since November 2022. New Orders rose 3.7 points to 60.9, the highest since February 2023. Backlogs climbed 4.7 points to 55.6, New Export Orders 4.3 points to 56.3, Imports 4.5 points to 56.3. Almost everything that measures demand accelerated.

Almost. The Employment Index came in at 47.8 percent — contracting for a second straight month. It improved four-tenths from July's 47.4, but it sits below its own twelve-month average of 48.8 and, as Miller notes, it has now been below 50 in 13 of the last 18 months. Services employ roughly five times as many Americans as manufacturing. One day before the payroll report, the largest employment sector in the economy is telling you its headcount is shrinking while its order book hits a three-and-a-half-year high.

Because ISM's headline is a simple average of four subindexes, the 1.3-point gain decomposes exactly. New Orders contributed +0.925, Business Activity +0.65, Employment +0.10, and Supplier Deliveries -0.375. New Orders alone accounts for 71 percent of the increase. Note the sign on Supplier Deliveries: services deliveries got faster, and because that index is inverted, faster deliveries dragged the headline down. The mirror image of Tuesday's manufacturing report, where slowing deliveries propped the headline up. Strip the delivery mechanics out of both and the rotation is wider than the headlines show.

Then there is the number that should worry the Fed most. The Prices Index registered 72.6 percent, up 2.3 points, its highest level since August 2022. It has now exceeded 70 percent in five of the last six months, has been above 60 for twenty-one straight months, and its twelve-month average rose to 68.5 percent — the highest since April 2023. The trend column in ISM's own table puts price increases at 111 consecutive months, which runs back to 2017. Manufacturing prices sat at 71.1 on Tuesday and got most of the attention. Services prices are higher, they are still rising, and they matter far more for core inflation.

The commodity detail explains it. After six commodities were reported down in price in July, that total fell to exactly one in August: fuel — which was simultaneously reported as up in price for a seventh consecutive month, appearing on both lists. Petroleum-related products, diesel and gasoline were again up. And GPUs and steel were added to the short-supply list, with a Retail Trade panelist reporting that "the memory shortage is continually getting worse." The AI supply crunch that ran through Tuesday's manufacturing survey has now reached the service sector.

Which brings us to the actual story of this release, and it is not either headline. The two surveys contradict each other on the two variables the Fed cares about, and they contradict each other in opposite directions on each. On employment, ISM has services contracting for a second month; S&P Global reports services job creation at its highest rate in just over a year and a half — the strongest since January 2025 — with panelists linking hiring to keeping pace with demand. On prices, ISM has services costs at a four-year high and accelerating; S&P Global reports input cost inflation at its slowest pace since April 2025 and output price inflation easing to a nine-month low. Same sector, same month, overlapping survey windows.

Both cannot be right. What the divergence probably reflects is panel composition and question construction — S&P surveys about 400 firms across consumer, transport, information, finance, insurance, real estate and business services, while ISM's panel and industry weighting differ, and the two ask about change in slightly different terms. But for a trader the practical implication is simple: on services employment and services prices, the evidence this month is genuinely ambiguous, and anyone quoting one survey as settled is quoting half the data.

Where they do agree, the signal is strong. S&P Global's Services Business Activity Index printed 56.5, up from 54.6 and the strongest in 20 months, with new business growth the sharpest since the end of 2024 and the first rise in new export orders in nine months. Its Composite Output Index hit 56.0, a 52-month high. Both surveys show demand accelerating hard, backlogs building, and export orders turning up. Usamah Bhatti of S&P Global Market Intelligence put his survey-implied nowcast at 3.0 percent annualized third-quarter GDP, against what he characterized as a "meagre" 1.5 percent in the second quarter. ISM's own mapping is more conservative, translating 55.4 into a 2.3 percentage point annualized rise in real GDP. Two survey-based nowcasts, seventy basis points apart, both pointing up.

Bhatti also named the rotation directly: "Growth momentum appears to have shifted from manufacturing to services." The side-by-side table ISM publishes makes it unarguable. Services rose on nine of the ten indexes the two surveys share; manufacturing fell on seven of them. The services PMI at 55.4 is now above the manufacturing PMI at 54.6, having been well below it in July at 54.1 against 55.6.

The last thread is the one that ties back to this morning's other release. ISM Services shows Business Activity at a 46-month high with Employment contracting. Firms are producing substantially more without adding people. That is the same phenomenon BLS measured in the productivity accounts three hours earlier, where nonfarm productivity rose 1.4 percent, real hourly compensation fell 3.3 percent, and the labor share of output hit 52.8 percent, its lowest level since the series began in 1947. Services output is surging, services headcount is not, and by BLS's own accounting the gain is landing in profit rather than pay. Backlogs at 55.6 with respondents attributing them to "low staffing levels" says the constraint may be the supply of workers rather than the demand for them — which is the more benign reading, and the one ISM's own commentary leans toward, noting that the share of firms cutting staff fell from 19 percent in July to 17.1 percent in August.

The Internals

ISM's own side-by-side of the two sectors, August 2026. The first four rows are the subindexes that compose the services headline:

Index · Services Aug · Services Jul · Change · Direction · Trend, months · Mfg Aug · Mfg Jul · Change

Headline PMI · 55.4 · 54.1 · +1.3 · Growing · 26 · 54.6 · 55.6 · -1.0

Business Activity or Production · 61.7 · 59.1 · +2.6 · Growing · 26 · 58.3 · 58.5 · -0.2

New Orders · 60.9 · 57.2 · +3.7 · Growing · 15 · 53.7 · 56.7 · -3.0

Employment · 47.8 · 47.4 · +0.4 · Contracting · 2 · 51.2 · 52.8 · -1.6

Supplier Deliveries · 51.3 · 52.8 · -1.5 · Slowing · 21 · 59.3 · 58.9 · +0.4

Inventories · 56.7 · 51.4 · +5.3 · Growing · 7 · 50.6 · 51.2 · -0.6

Prices · 72.6 · 70.3 · +2.3 · Increasing · 111 · 71.1 · 71.1 · 0.0

Backlog of Orders · 55.6 · 50.9 · +4.7 · Growing · 7 · 51.8 · 55.0 · -3.2

New Export Orders · 56.3 · 52.0 · +4.3 · Growing · 3 · 53.2 · 53.0 · +0.2

Imports · 56.3 · 51.8 · +4.5 · Growing · 2 · 52.5 · 55.7 · -3.2

Inventory Sentiment · 54.1 · 52.5 · +1.6 · Too high · 40 · n/a · n/a · n/a

Services rose on nine of the ten shared indexes. Manufacturing fell on seven. The overall economy has now grown for 75 consecutive months by ISM's reckoning.

The services headline is the equal-weighted mean of four subindexes, so the monthly move decomposes exactly:

Subindex · Change · Contribution to the headline · Share of the 1.3 point gain

New Orders · +3.7 · +0.925 · 71 percent

Business Activity · +2.6 · +0.650 · 50 percent

Employment · +0.4 · +0.100 · 8 percent

Supplier Deliveries · -1.5 · -0.375 · The only negative contributor

Total · n/a · +1.300 · Matches the published 55.4 from 54.1

Supplier Deliveries subtracted from the headline because the index is inverted and services deliveries got faster. Tuesday's manufacturing report had the opposite mechanic, with slowing deliveries adding to that headline.

Where the standout readings stand historically:

Index · August 2026 · Standing

Business Activity · 61.7 · Highest since November 2022, when it hit 62.7

New Orders · 60.9 · Highest since February 2023, when it hit 61.0

Prices · 72.6 · Highest since August 2022, matching that 72.6 reading

Prices, 12-month average · 68.5 percent · Highest since April 2023

Backlog of Orders · 55.6 · Highest since February 2026, when it hit 55.9

Employment · 47.8 · Below 50 in 13 of the last 18 months

Services PMI, 12-month average · 53.7 percent · Eighth consecutive monthly increase

S&P Global's final August readings, published ninety minutes earlier:

Measure · August · July · Standing

Services Business Activity Index · 56.5 · 54.6 · Strongest in 20 months, well above long-run trend

Composite Output Index · 56.0 · 54.5 · A 52-month high

New business · Steep and faster · n/a · Sharpest since the end of 2024

New export orders · Rising · Falling · First increase in nine months, fastest since December 2024

Employment · Solid growth · n/a · Fastest job creation in just over 18 months

Backlogs · Accumulating solidly · n/a · Rate not exceeded since May 2022

Input prices · Elevated, easing · Recent high · Slowest pace since April 2025

Output prices · Sharp increase, easing · n/a · Nine-month low

Year-ahead expectations · Positive · Positive · Still below trend

Note the collection window: S&P Global gathered its data 12-26 August, so the two surveys cover substantially the same period.

Where The Two Surveys Disagree

This is the part of the release that matters, so it is worth setting out plainly:

Variable · ISM says · S&P Global says · Verdict

Activity · Business Activity 61.7, highest since Nov 2022 · Business Activity 56.5, strongest in 20 months · Agree, strongly

New orders · 60.9, highest since Feb 2023 · Sharpest since end of 2024 · Agree, strongly

Export orders · 56.3, up 4.3 points · First rise in nine months · Agree

Backlogs · 55.6, highest since Feb 2026 · Rate not exceeded since May 2022 · Agree

Employment · 47.8, contracting a second month · Fastest job creation in 18 months · DIRECT CONTRADICTION

Input prices · 72.6, highest since Aug 2022, accelerating · Slowest pace since April 2025 · DIRECT CONTRADICTION

Selling prices · Not separately reported · Nine-month low · ISM offers no comparison

Implied GDP · 2.3 percent annualized · 3.0 percent annualized for Q3 · Both positive, 70bp apart

On activity and orders the two agree emphatically, and that part of the picture can be treated as established: services demand accelerated hard in August. On employment and prices they point opposite ways, which means the honest position is that both are unresolved until tomorrow's payroll report and next week's inflation print.

The likely explanation is methodological rather than one survey being wrong. S&P Global polls roughly 400 firms across consumer excluding retail, transport, information, communication, finance, insurance, real estate and business services, stratified by sector and workforce size. ISM's panel composition and industry weighting differ, its diffusion questions are worded differently, and its Prices Index measures what members pay rather than a blend of input and output charges. Neither is a better survey. They are measuring adjacent things and this month the difference is large enough to matter.

Industry breadth, from ISM. Twelve industries grew and five contracted, against thirteen and four in July:

Direction · Industries

Growing, in order · Mining; Real Estate, Rental & Leasing; Accommodation & Food Services; Wholesale Trade; Arts, Entertainment & Recreation; Educational Services; Retail Trade; Information; Professional, Scientific & Technical Services; Utilities; Transportation & Warehousing; Public Administration

Contracting · Agriculture, Forestry, Fishing & Hunting; Construction; Management of Companies & Support Services; Finance & Insurance; Health Care & Social Assistance

Three entries on that contracting list deserve attention.

Health Care & Social Assistance is contracting. Yesterday ADP reported education and health services adding 45,000 jobs — more than the entire national private total, with every other sector shedding 7,000 between them. ISM measures business activity and ADP measures employment, so both can hold, but the sector carrying all of America's job growth is the one ISM says is shrinking. That tension is worth watching rather than resolving.

Finance & Insurance is contracting, which lines up with JOLTS on Tuesday showing that sector effectively frozen — a 1.4 percent hires rate against a 0.2 percent layoff rate. The respondent explanation is specific: "Rising health-care costs, regulatory complexity and reimbursement pressure continue to drive a cautious purchasing environment within health insurers."

Construction is contracting, and a panelist supplied the mechanism with a number attached: "The bond market pushed 30-year mortgage rates up to 6.67 percent, reducing affordability and moving prospective buyers back to the sidelines... Rate buydowns and discounts have become the norm instead of the tool to drive traffic." Warsh named housing as already showing strains at Jackson Hole. This is what that looks like from inside the industry.

The commodity and cost detail, which is where the Prices Index comes from:

Item · August

Commodities down in price · One only, fuel, down from six in July

Fuel's other listing · Up in price for a seventh consecutive month, appearing on both lists

Also up in price · Petroleum-related products, diesel, gasoline

Added to short supply · GPUs and steel

Most cited supply-chain issues · Tariffs and the Middle East conflict, both returning to the top

Share of firms cutting staff · 17.1 percent, down from 19.0 percent in July

Two respondent themes run through the commentary. Tariffs are being described in operational detail — a Professional, Scientific & Technical Services panelist cited "stacked Section 301 duties plus the newer forced-labor related tariffs" keeping landed costs elevated, and said margin pressure "we can only partially pass through." And the AI hardware squeeze has crossed into services: GPUs joined the short-supply list, and a Retail Trade panelist reported the memory shortage "continually getting worse," with low inventory and high prices for devices requiring memory cards.

Impact on USD

• Mixed, lean bullish — a headline beat with services prices at a four-year high, on the one variable the Fed has said it is watching above all others.
• Prices at 72.6 with a twelve-month average of 68.5, the highest since April 2023, is a harder inflation signal than Tuesday's manufacturing 71.1 because services dominate core.
• Business Activity at a 46-month high and New Orders at a 42-month high remove any growth-scare argument from this release.
• Against it, and it is not small: ISM's Employment Index is contracting for a second month in the sector that employs five times what manufacturing does, one day before payrolls.
• The genuine caveat is that S&P Global read the same month as easing input costs and the fastest hiring since January 2025. On both hawkish and dovish channels, the evidence is split.

Impact on US Indices (ES / NQ / YM)

• Mixed, lean bullish — activity and orders at multi-year highs with headcount flat is a margin story, and S&P's composite at a 52-month high supports the growth leg.
• The productivity read is the bullish core: Business Activity at 61.7 against Employment at 47.8 means services firms are producing much more without adding people, which is exactly what this morning's record-low labor share reflects.
• Against it, input costs at 72.6 with panelists saying they can only "partially pass through" margin pressure is a real squeeze on services operators.
• Sector detail cuts both ways: Accommodation & Food Services and Arts, Entertainment & Recreation were among the fastest growers, while Construction, Finance & Insurance and Health Care & Social Assistance contracted.
• Homebuilders take the clearest hit — a panelist put 30-year mortgage rates at 6.67 percent and described buyers moving back to the sidelines.

Impact on Gold

• Slight bullish — services prices at a four-year high, in their 111th consecutive month of increases, is the inflation-persistence case in its strongest available form.
• Only one commodity was reported down in price, against six in July, which is breadth rather than an energy artifact.
• Offsetting: a headline beat and multi-year-high activity readings push the front end hawkish, and real yields dominate the metal near term.
• Conditional: S&P Global's easing-cost read is the counterargument, and August CPI on September 11 settles which survey was closer.

What To Watch

• August employment situation — Friday, September 4, 8:30am ET. FactSet consensus is +65,000. ISM Services Employment at 47.8 and ISM Manufacturing at a +0.3 net point one way; S&P Global's 18-month hiring high points the other.
• August CPI — Friday, September 11. ISM services prices at 72.6 against S&P Global's nine-month low in selling prices is the cleanest test of which survey is reading the price level correctly.
• The ISM Services Employment Index. Below 50 in 13 of the last 18 months. A third consecutive contraction would make this the most important labor series nobody quotes.
• FOMC decision and dot plot — Tuesday and Wednesday, September 15-16. Three officials dissented for a hike in July. Services prices at a four-year high is the best material they have received since.
• Next ISM Services PMI — Monday, October 5. Watch whether Employment crosses 50 and whether Prices holds above 70 for a sixth time in seven months.
• GPUs on the short-supply list. The AI hardware squeeze has moved from manufacturing into services, and it is now appearing in retail inventories and pricing.

TLDR

ISM Services PMI and S&P Global Final Services PMI, August 2026 (released September 3):

• ISM Services PMI: 55.4 (vs 54.3 est, 54.1 prior) — a beat, and a 26th straight month of expansion
• Business Activity 61.7, the highest since November 2022; New Orders 60.9, the highest since February 2023
• Prices 72.6, the highest since August 2022 — above 70 in five of six months, above 60 for 21 straight, twelve-month average 68.5, the highest since April 2023, and a 111th consecutive month of increases
• Employment 47.8, contracting for a second straight month and below 50 in 13 of the last 18 months, in a sector that employs roughly five times what manufacturing does
• Backlog 55.6, Imports 56.3, New Export Orders 56.3 — all up more than four points
• The 1.3-point headline gain decomposes exactly: New Orders +0.925, Business Activity +0.650, Employment +0.100, Supplier Deliveries -0.375
• Only one commodity was reported down in price — fuel — against six in July; GPUs and steel were added to the short-supply list
• S&P Global's final Services Business Activity Index: 56.5, a 20-month high; its Composite hit 56.0, a 52-month high
• But S&P reports input costs at their slowest since April 2025, selling prices at a nine-month low, and the fastest services hiring in 18 months — the opposite of ISM on employment and on prices
• GDP nowcasts: ISM maps 55.4 to 2.3 percent annualized; S&P Global's Bhatti puts Q3 at 3.0 percent
• Contracting industries include Construction, Finance & Insurance and Health Care & Social Assistance — the sector ADP said carried all of America's job growth yesterday
• Share of firms cutting staff fell to 17.1 percent from 19.0 percent in July

On activity the two surveys agree emphatically: services demand accelerated hard in August, with ISM Business Activity at a 46-month high and S&P's composite at a 52-month high. On the two things the Fed actually cares about they contradict each other in opposite directions — ISM has services employment contracting for a second month and prices at a four-year high, while S&P has the fastest hiring since January 2025 and input costs at their slowest since April 2025. Anyone quoting one of those as settled is quoting half the data. What is not in dispute is the shape: Business Activity at 61.7 with Employment at 47.8 means services firms are producing far more without adding people, which is precisely the record-low 52.8 percent labor share BLS published three hours earlier. Payrolls tomorrow decides the employment argument, CPI on September 11 decides the price one, and the FOMC meets September 15-16 with services prices at a four-year high.

_For informational purposes only. Not investment advice._