United States services activity strengthened in August, with the Institute for Supply Management's (ISM) services PMI pointing to the fastest pace of expansion in six months.
The ISM's services PMI rose to 55.4 in August from 54.1 in July, beating expectations of 54.3 as business activity, new orders, inventories and backlogs accelerated.
Steve Miller, CPSM, CSCP, Chair of the Institute for Supply Management, said:
"The Business Activity Index remained in expansion territory in August, increasing 2.6 percentage points to 61.7% from July’s reading of 59.1%.
"The New Orders Index registered 60.9%, 3.7 percentage points above July’s figure of 57.2%. The Employment Index contracted for a second straight month with a reading of 47.8%, a 0.4-percentage-point increase from the 47.4% recorded in July."
“The Employment Index (47.8%) remained below its 12-month average of 48.8%. This index has been below 50% in 13 of the last 18 months.
"However, the Business Activity Index had its highest reading since hitting 62.7% in November 2022, and the New Orders Index had its highest reading since February 2023 (61%)."
Miller said tariffs and the Middle East conflict had returned as the most frequently cited issues affecting respondents' supply chains.
Positive seasonal factors also featured prominently, with Accommodation & Food Services and Arts, Entertainment & Recreation among the five fastest-growing industries in August.
There were some signs of improvement in the labour market, with the share of companies cutting staff levels falling to 17.1% in August from 19% in July.
The ISM said the strength in business activity and new orders could signal increased employment in the services sector.
The Backlog of Orders Index also reached its highest level since February 2026, with some respondents attributing rising backlogs to low staffing levels.
August's improvement came despite rising price pressures, slower supplier deliveries and mixed sentiment as businesses continued to navigate geopolitical tensions and tariff-related uncertainty.
An Accommodation & Food Services respondent said:
“General business conditions are positive. The challenges lie in managing through the dynamic nature of the administration’s policies — tariffs and Middle East conflict — that have caused numerous input cost headwinds for suppliers and us.”
