Key facts
- The ISM nonmanufacturing PMI dipped to 54.5 in October from 54.9 in September, below the 54.8 forecast in a Reuters poll.
- The survey's new orders measure decreased to 55.9 in October from 59.8 in September.
- The survey's supplier deliveries measure jumped to 56.7 from 53.2 in September, with deliveries slowed for 23 consecutive months.
- The survey's prices paid measure eased to a still-high 73.0 in October from 74.0 in September.
- The survey's services employment measure rose to 51.4 in October from 50.1 in September.
US services sector growth slowed marginally in October, with the Institute for Supply Management's nonmanufacturing Purchasing Managers' Index dipping to 54.5 from 54.9 in September, the ISM said on Wednesday. A reading above 50 indicates growth in the services sector, which accounts for more than two-thirds of US economic activity. Economists polled by Reuters had forecast the PMI little changed at 54.8.
The survey's measure of new orders received by services businesses decreased to 55.9 from 59.8 in September. Delivery performance by suppliers deteriorated further against the backdrop of the US-Israel war with Iran and tariffs on imports. The Middle East conflict, now in its ninth month, has boosted energy prices and caused shortages of commodities shipped through the Strait of Hormuz. The survey's measure of supplier deliveries jumped to 56.7 from 53.2 in September; a reading above 50 indicates slower deliveries. Deliveries have slowed for 23 consecutive months, keeping input prices high.
The survey's measure of prices paid by businesses for inputs eased to a still-high 73.0 from 74.0 in September. The ISM on Monday reported a slight moderation in prices paid for inputs by manufacturers in October. Economists expect inflation to continue to run above the Federal Reserve's 2% target into 2027. The Fed last Wednesday left its benchmark overnight interest rate within the 3.75%-4.00% range while acknowledging that inflation "remains elevated." Economists expect the US central bank to raise borrowing costs in December.
The ISM survey showed a marginal increase in services sector employment, with its measure rising to 51.4 from 50.1 in September, aligning with economists' expectations for moderate growth in nonfarm payrolls in October. The government's employment report on Friday is likely to show payrolls advanced by 65,000 in October after increasing 29,000 in September, according to a Reuters survey of economists. The unemployment rate is forecast to have been unchanged at 4.2%.