Growth in the US services sector slowed in October 2026, with the Institute for Supply Management (ISM) Services Purchasing Managers’ Index (PMI) declining to 54.5 from 54.9 in September.
The reading marked the lowest level in three months and came below market expectations of 54.8. However, the index remained above the 50-point threshold that separates expansion from contraction, indicating continued growth at a slower pace.
The moderation reflected weaker business activity, new orders and inventory growth, while employment conditions improved for a second consecutive month.
Business Activity and New Orders Moderate
The ISM Business Activity Index declined to 53.8 in October from 56.5 in September, indicating a slower pace of expansion.
New orders also moderated, falling to 55.9 from 59.8, while the Inventories Index decreased to 55.4 from 57.8.
Meanwhile, the Supplier Deliveries Index increased to 56.7 from 53.2, indicating slower delivery performance across service-sector supply chains.
Employment conditions showed further improvement, with the Employment Index rising to 51.4 from 50.1, marking a second consecutive month of expansion.
Tariffs and Fuel Costs Remain Key Concerns
Price pressures eased slightly in October, with the Prices Index declining to 73.0 from 74.0. Despite the decrease, the elevated reading indicated that businesses continued to face substantial cost increases.
According to Steve Miller, Chair of the ISM Services Business Survey Committee, tariffs and fuel costs remained the most frequently cited challenges affecting supply chains.
Miller said many companies had not yet experienced the full impact of higher costs or passed those increases on to customers, raising the possibility of additional pricing pressures in the coming months.
Survey respondents also reported a significant monthly increase in comments concerning supply chain constraints.
The October results showed continued expansion in US services activity, alongside slower growth in demand and persistent input-cost pressures. The employment index improved, while the prices index remained elevated despite its monthly decline.
