The ISM Services PMI fell to 53.6 in September from 54.5 in August, roughly in line with the 53.5 print consensus was expecting. This is the ninth consecutive month of expansion for the services sector.
The business activity sub-index rose 1.5 percentage points (pp) to 58.8 in September.
The new orders index sank 5.7 pp to 51.8, the softest print since December 2022.
The prices paid component was unchanged at 58.9. This ends two consecutive months of increases and keeps the index below the values it reached between July 2020 and April 2023.
Supplier delivery times registered 50.4, up from 48.5 in August, while the backlog of orders index retraced some of last month’s losses, gaining 6.8 points to 48.6.
The employment sub-component fell 1.3 pp to 53.4.
Thirteen out of 18 industries expanded in September, the same number as in August.
Key Implications
The ISM services index gave back some of its August gains, but still remains above the soft patch from this past spring. However, signs are pointing to increasing headwinds for the sector. New orders growth continues to trend lower, while order backlogs have contracted in six of the past seven months.
For policymakers concerned about inflationary pass through, the silver lining in the report is although prices paid growth is still running above the pre-pandemic pace, it is significantly slower than during the inflationary burst over the past two years. The developments in this report support the notion that growth is set to slow through the rest of the year and should take some pressure off prices.
