The Institute of Supply Management report tells two different stories — the economy is growing, but the weak jobs market is weighing on activity.
The service index was 52.4% in October, an indicator of expansion. That was 240 basis points higher than September’s 50%.
The business activity index was 54.3% and the supplier deliveries index was 50.8%, down 1.8 percentage points below the 52.6% in September and 70 basis points below the 12-month average of 51.5%. The supplier deliveries index works inversely to the other indexes, meaning that delivery performance has been slower.
Driving the overall results was the new orders index of 56.2%, up from 50.4% in September, although the employment index at 48.2% showed contraction for the fifth month in a row.
The prices index was 70% in October, the first time it reached this threshold since the October 2022 reading of 70.7%.
The inventories index was 49.5% in October, 1.7 percentage points above the September figure of 47.8%, the second month of contraction after three months of expansion. The backlog of orders index, 40.8% in October, has been in contraction for eight months in a row now.
Eleven industries saw growth in October, one additional from September. The number reporting contraction was down from seven to six.
“October’s Services PMI is a continuation of a downward trend of more than 10 percentage points in the 12-month average since February 2022, when it was 62.6 percent,” said ISP Chair Steve Miller in prepared remarks.
“The rebounds in both the Business Activity and New Orders indexes in October are positive signs, while the continued contraction in the Employment index shows a lack of confidence in the continued strength of the economy.”
Respondents to the ISM survey commented about flat activity, uncertainty and tariffs causing disruptions. Someone in real estate rental and leasing said the economy continues to provide mixed signals, making it “difficult to determine how to move forward as a business given the uncertainty.”
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