US Services Keep Expanding in October, but Orders and Output Cool Off

The US services sector notched another month of growth in October, the Institute for Supply Management said Wednesday. Its Services PMI came in at 54.5%, down by 0.4 percentage points from September but still comfortably above the 50 mark that separates expansion from contraction.

Under the hood, the momentum looked less rosy. The Business Activity Index slid by 2.7 percentage points, landing at 53.8%, while New Orders dropped by 3.9 percentage points, settling at 55.9%. Both remain in growth mode — just at a slower clip.

Hiring was the bright spot. The Employment Index climbed by 1.3 percentage points to 51.4%, pushing further into expansion territory. Meanwhile the Prices Index eased by 1 percentage point, though at 73% it still signals steep cost pressure across the sector.

ISM Chair Steve Miller said tariffs and fuel costs remain the biggest headache for supply chains. Many respondents, he noted, say they haven't yet absorbed the full hit from those cost escalations — or haven't passed them along to customers.

One number stood out from the rest: the Backlog of Orders Index climbed to 58%, its highest reading since it hit 58.3% back in July 2022. That's a sign of demand piling up faster than providers can clear it.

So the picture is a services economy that's still growing, still hiring, and still charging more — but with less zip in output and new business than a month ago, and a backlog that keeps building.