ISM Services 54.9 vs 55.0 Est — Prices Hit 74.0, Highest Since July 2022
Fundamentals · 2026-10-05
ISM Services PMI 54.9 vs 55.0 est (prior 55.4), a 27th month of expansion; Prices 74.0 vs 72.9 est — the highest since July 2022 and a 112th straight month of increases; Employment 50.1 vs 48.0 est, back above 50 for the first time in three months; Business Activity 56.5 (-5.2); New Orders 59.8 (-1.1); Backlog 56.6 (+1.0); New Export Orders 46.9 (-9.4), contracting for the first time in eight months; S&P Global final Services Business Activity 58.8 vs 58.7 flash, the fastest since July 2021, Composite 58.4, unchanged from flash; S&P input costs steepest since November 2022 and hiring fastest since June 2022; S&P survey window 10-28 September.
What It Changes
- The headline missed by a tenth. The parts the Fed watches did not. Prices paid rose 1.4 points to 74.0 against 72.9 expected, and employment came in at 50.1 against 48.0. Both beat in the hawkish direction.
- The two surveys now agree on prices and hiring. In August they contradicted each other on both. This month ISM and S&P Global both show input costs at their fastest since late 2022 and services hiring picking up.
- It cuts against Friday's payrolls. The economy added 29,000 jobs in September and unemployment rose to 4.2%. The largest sector's own surveys say hiring improved in the same month.
- Prices are hot in both sectors at once. Manufacturing prices hit 77.9 last Thursday and services prices 74.0 today, each the highest since 2022. Combined with today's hiring numbers, that makes it harder for October hike odds to keep falling after Friday's drop to about 17%-23%.
Impact
- USD — Slight bullish — hot prices plus improving services hiring support the rate argument that Friday's payrolls had weakened.
- The dollar came into the release already at a 52-week high, with DXY touching 102.54 overnight. That move came from France and the euro, so this print adds a US reason to a move driven by Europe.
- What moves rate pricing in this print is the prices index, not the headline. A 0.1-point headline miss carries little information. A 1.4-point rise in prices paid to a three-year high carries more, especially with 17 of 18 industries reporting higher prices and none lower.
- US Indices (ES / NQ / YM / RTY) — Mixed, lean bearish — demand is still strong, but the inflation side of the report is the part that moves yields, and the 10-year was already at 5.28% this morning.
- RTY is the most exposed. It has the most to lose if hike pricing rebuilds, and its domestic-demand support is weaker than the S&P headline suggests: ISM's Business Activity fell 5.2 points and Construction reported lower new orders for a second month.
- NQ has its own support in the report. "Urgent requests around AI and cybersecurity" lifted activity, S&P says Information & Communication grew fastest by far, and memory products have been rising in price for nine months.
- Gold (GC) — Mixed, lean bearish — gold has been trading on real rates, and higher prices plus improving hiring push rate expectations the wrong way for it. The Middle East haven bid that lifted it this morning is still there.
Inside The Number
The ISM Services PMI registered 54.9 in September, down 0.5 from August's 55.4 and a tenth below the 55.0 consensus. It is the 27th consecutive month of expansion, 0.8 above the 12-month average of 54.1, and that average has now risen for nine months in a row. On the headline alone this is a steady month. The detail is different.
The Prices Index rose 1.4 points to 74.0, the highest since July 2022 (74.5). It has been above 70 in six of the last seven months and above 60 for 22 straight months. Its 12-month average rose to 69.0, the highest since March 2023. 50.3% of respondents reported paying more and only 2.2% paid less, against 44.8% and 2.3% in August. Seventeen industries reported higher prices and none reported lower. Only lumber and pork products were reported down in price, and lumber was also on the up list. Fuel has been up for eight months running, gasoline for eight, diesel for seven and memory products for nine. Miller says fuel costs were mentioned twice as often as any other single issue.
Employment rose 2.3 points to 50.1, its first reading above 50 in three months, and above its 12-month average of 49.0. The reading is less broad than it looks. 16.5% of respondents reported higher headcount and 16.2% reported lower. Only seven industries added staff and eight cut. Miller attributes the improvement to rising backlogs and high activity. One respondent described cuts in the other direction: "Restructuring due to efficiencies gained using AI tools."
Demand slowed from a very strong August, but it was still strong. Business Activity fell 5.2 points to 56.5, slightly below its 12-month average of 56.7. New Orders fell 1.1 to 59.8, a 16th month of growth. Backlog of Orders rose 1.0 to 56.6. Miller describes that as the highest since July 2022, and its eight-month run is the longest since a 26-month streak ended in February 2023. Firms are taking in work faster than they can complete it, and that is what Miller says is driving the hiring.
Export orders fell sharply. New Export Orders dropped 9.4 points to 46.9, contracting for the first time in eight months. Only 8.2% of respondents reported higher export orders and 14.4% reported lower. On the cost side, imports slowed to 52.9 and supplier deliveries slowed to 53.2. One retail respondent said "shipping containers from overseas are double the cost."
S&P Global's final services reading confirmed the flash and ticked up. Business Activity rose to 58.8 from 56.5, a tenth above the 58.7 flash and the sharpest rise since July 2021. All five broad sectors grew for the first time in 10 months, with Information & Communication growing fastest by far. New orders grew at the fastest pace in four and a half years, mainly from domestic demand. Hiring was the fastest since June 2022, and backlogs rose for a 19th month at the sharpest rate in almost four and a half years. Input-cost inflation went from a 16-month low in August to the steepest since November 2022 in September, driven by gas prices, transport and labour costs. Output price inflation was the second-fastest in just over a year. Chris Williamson put the combined survey at about 4% Q3 growth and 5% for September alone, and warned that "concerns that the economy is running too hot will be fueled by the survey's price gauges."
The two surveys still disagree, but now on activity and exports rather than prices and jobs. S&P says activity accelerated to a five-year high. ISM says it slowed by 5.2 points. S&P says export orders grew at August's 20-month high pace. ISM says they contracted. On the variables that matter for the rate path, they agree this month for the first time in two months. ISM's own GDP mapping is more cautious than S&P's: Miller translates 54.9 into a 2.1-percentage point annualized rise in real GDP, down from 2.3 in August.
The Internals
ISM's side-by-side of the two sectors, September 2026. The first four rows make up the services headline:
Index · Services Sep · Services Aug · Change · Direction · Trend, months · Mfg Sep · Mfg Aug · Mfg change
Headline PMI · 54.9 · 55.4 · -0.5 · Growing, slower · 27 · 54.5 · 54.6 · -0.1
Business Activity or Production · 56.5 · 61.7 · -5.2 · Growing, slower · 27 · 56.7 · 58.3 · -1.6
New Orders · 59.8 · 60.9 · -1.1 · Growing, slower · 16 · 55.3 · 53.7 · +1.6
Employment · 50.1 · 47.8 · +2.3 · Growing, from contracting · 1 · 52.7 · 51.2 · +1.5
Supplier Deliveries · 53.2 · 51.3 · +1.9 · Slowing, faster · 22 · 59.0 · 59.3 · -0.3
Inventories · 57.8 · 56.7 · +1.1 · Growing, faster · 8 · 48.6 · 50.6 · -2.0
Prices · 74.0 · 72.6 · +1.4 · Increasing, faster · 112 · 77.9 · 71.1 · +6.8
Backlog of Orders · 56.6 · 55.6 · +1.0 · Growing, faster · 8 · 56.4 · 51.8 · +4.6
New Export Orders · 46.9 · 56.3 · -9.4 · Contracting, from growing · 1 · 50.9 · 53.2 · -2.3
Imports · 52.9 · 56.3 · -3.4 · Growing, slower · 3 · 51.0 · 52.5 · -1.5
Inventory Sentiment · 51.7 · 54.1 · -2.4 · Too high, slower · 41 · n/a · n/a · n/a
The services headline is the equal-weighted mean of four subindexes, so the move decomposes exactly. August's unrounded headline was 55.425 and September's is 54.900, a fall of 0.525:
Subindex · Change · Contribution to the headline · Read
Business Activity · -5.2 · -1.300 · Caused the whole decline, and more
New Orders · -1.1 · -0.275 · Small drag from a 3.5-year high
Employment · +2.3 · +0.575 · Largest positive contributor
Supplier Deliveries · +1.9 · +0.475 · Inverted: slower deliveries added to the headline
Total · n/a · -0.525 · Matches 55.4 to 54.9
Business Activity alone took 1.3 points off the headline. Employment and slower deliveries added back 1.05 between them, and the deliveries part counts as positive only because the index is inverted. Without it the headline would have fallen about a full point.
Response distributions for the indexes that matter most:
Index · % Higher · % Same · % Lower · Index · August % Higher · August % Lower
Prices · 50.3 · 47.5 · 2.2 · 74.0 · 44.8 · 2.3
Employment · 16.5 · 67.3 · 16.2 · 50.1 · 11.8 · 17.1
Business Activity · 30.9 · 56.7 · 12.4 · 56.5 · 32.6 · 11.1
New Orders · 31.4 · 58.1 · 10.5 · 59.8 · 31.1 · 10.7
Backlog of Orders · 21.5 · 70.2 · 8.3 · 56.6 · 19.7 · 8.5
New Export Orders · 8.2 · 77.4 · 14.4 · 46.9 · 22.3 · 9.7
Where the standout readings stand historically:
Measure · September 2026 · Standing
Prices · 74.0 · Highest since July 2022 (74.5)
Prices, 12-month average · 69.0 · Highest since March 2023
Prices above 70 · 6 of last 7 months · Above 60 for 22 straight months
Backlog of Orders · 56.6 · Highest since July 2022 (58.3), per Miller
Backlog streak · 8 months · Longest since a 26-month run ended February 2023
Employment · 50.1 · First reading above 50 in three months
New Export Orders · 46.9 · First contraction in eight months
Services PMI, 12-month average · 54.1 · Ninth consecutive monthly increase
Implied real GDP · 2.1pp annualized · Down from 2.3pp in August
S&P Global's final September readings, published at 09:45:
Measure · Final September · Flash September · August · Standing
Services Business Activity Index · 58.8 · 58.7 · 56.5 · Sharpest rise since July 2021, fourth monthly gain
Composite Output Index · 58.4 · 58.4 · 56.0 · Strongest in over five years
New business · Sharp and faster · Faster · Faster · Fastest in four and a half years
New export orders · Rising · Rising · Rising · Growth unchanged from August's 20-month high
Employment · Rising · Rising · Rising · Third monthly gain, fastest since June 2022
Backlogs · Rising, faster · Rising · Rising · 19 months, sharpest in almost four and a half years
Input prices · Accelerating · Accelerating · 16-month low · Steepest since November 2022
Output prices · Accelerating · n/a · Easing · Second-fastest in just over a year
Year-ahead expectations · Improved · n/a · Below trend · One-year high
Where The Two Surveys Agree And Disagree
Variable · ISM · S&P Global · Verdict
Input prices · 74.0, highest since July 2022 · Steepest since November 2022 · Agree — reversed from August
Employment · 50.1, first expansion in three months · Fastest hiring since June 2022 · Agree — reversed from August
Backlogs · 56.6, up 1.0 · Sharpest in almost four and a half years · Agree
New orders · 59.8, down 1.1 · Fastest in four and a half years · Both strong, direction differs
Activity · 56.5, down 5.2 · 58.8, sharpest since July 2021 · Disagree on direction
Export orders · 46.9, contracting · Growth at August's 20-month-high pace · Direct contradiction
Implied growth · 2.1pp real GDP annualized · About 4% Q3, 5% September · Both positive, S&P far stronger
ISM's industry breadth. Thirteen industries grew and four contracted, against twelve and five in August:
Measure · Industries up · Industries down · Notable
Headline · 13 · 4 · Contracting: Agriculture; Mining; Construction; Management of Companies & Support Services
Business Activity · 12 · 3 · Down: Accommodation & Food Services; Agriculture; Construction
New Orders · 13 · 1 · Construction the only decline, second month running
Employment · 7 · 8 · Cutting includes Health Care, Finance & Insurance, Utilities, Public Administration
Prices · 17 · 0 · No industry reported lower prices
New Export Orders · 3 · 6 · Nine industries reported no change
Commodities, as listed by ISM:
List · Items
Up in price · Copper (10 months), memory products (9), fuel (8), gasoline (8), software licensing (8), diesel (7), steel products (6), petroleum-based products (5), copper wire, switchgear, wire and cable, steel, labour, food products, lumber
Down in price · Lumber (also up), pork products
Short supply · Memory components (9), steel products (4), wire and cable (4), computers and related products, fuel, SSDs, switchgear
What The Firms Actually Said
- Fuel is the main pressure. Agriculture: "The high cost of diesel fuel has increased the cost of freight dramatically," with nitrogen fertilizer "to near record highs." Other Services: "The cost of fuel continues to impact our cost of providing services."
- Higher rates are hurting housing. Construction: "Interest rates continue to drive buyers out of the market. Half of buyers walking through the door cannot qualify to purchase." A Business Activity respondent: "Home sales are slowing as mortgage rates increase and inventory shrinks."
- Banks feel it too. Finance & Insurance: "Increased competition for deposits and higher funding costs are placing pressure on profitability and moderating growth expectations."
- Suppliers have pricing power. Wholesale Trade: "Weekly price increases are the norm these days on commodities products (copper, aluminum and polyvinyl chloride)," with manufacturers no longer "eager to cut prices to secure business."
- Steel is hard to get domestically. Utilities: "steel particularly difficult to source domestically. We are increasingly having to place orders internationally."
- Tariffs are still in the pipeline. Health Care: "Had vendor communications about more fuel charges and possible tariff reinstatement." Imports: "U.S.-Canada duties change impacting imports/exports."
- Not all costs are rising. Information: "freight and consumable material lead times have normalized," but "wage pressures and software licensing renewals continue to push operational expenses slightly higher."
- On S&P's side, firms tied their one-year-high confidence to new products, new clients and referrals. Some also mentioned "hopes for an easing of inflationary pressures."
Against This Morning's Open
- The Open called ISM services the fulcrum and said "the prices index matters as much as the headline." It set two cases: prices "well above 72.6" would support the hawks, and "a headline below 55 with softer prices" would add to Friday's labour-market message.
- It came out between the two, closer to the hawkish case. The headline was below 55 at 54.9, but prices were not softer: they rose to 74.0. The Open's labour test also failed in the hawkish direction. It said a reading under 48 would be consistent with payrolls, and employment printed 50.1.
What This Sets Up
- Next ISM Services: October data, due Wednesday 4 November (third business day). Before that, the FOMC meets on 27-28 October with this prices index as the latest services input.
- What would confirm the read: prices staying above 70 for a seventh time in eight months, and employment holding above 50 rather than falling back. Two months in a row above 50 would make it harder to treat Friday's payrolls as the whole labour story.
- What would break it: fuel dropping out of the commodities-up list or prices falling back toward the mid-60s. That would say September's jump was mainly the oil spike passing through, not a broad price trend.
- The disagreement to watch: whether ISM's export contraction and S&P's growth reconcile. A second month apart would point to a difference between the panels, not a real change in exports.
What Is This?
- What it is: Two surveys of the US service sector. S&P Global's final US Services PMI comes out at 09:45 ET from a panel of about 400 companies across consumer, transport, information, finance, insurance, real estate and business services; this month's data were collected 10-28 September and confirm the flash from 23 September. ISM's Services PMI follows at 10:00 ET, from purchasing and supply executives weighted by each industry's share of GDP, and is published on the third business day of the month. ISM's headline is an equal-weighted average of four subindexes (Business Activity, New Orders, Employment and Supplier Deliveries), so it decomposes exactly. S&P's headline is its Business Activity Index alone.
- Why it matters: Services are most of the US economy and most of core inflation. This month's report comes three days after a 29,000 payrolls print pushed October hike odds down to about one in five, with the Fed at 3.75%-4.00% after September's hike. The prices and employment readings are the ones that test that repricing.
- How to read it: Both are diffusion indexes. Above 50 means more firms reported an increase than a decrease, and the distance from 50 is breadth, not size. ISM's Supplier Deliveries is inverted, so slower deliveries add to the headline. ISM's Prices Index measures what firms pay, not what they charge. S&P states that its services and composite headlines are not comparable with a headline manufacturing PMI. ISM says a services PMI above 48.1 over time indicates the overall economy is growing.
Want the full explainer? Economic News Events, Explained breaks down this release and every other one we cover, in plain English.
_For informational purposes only. Not investment advice._