#United States #Economic Growth #Tempe #ISM Services PMI #U.S. Services Sector

Economic Activity in the U.S. Services Sector Shows Continued Growth in August 2025

Economic activity within the services sector of the United States has seen sustained expansion, marking the third straight month of growth as per the recent ISM Services PMI report. Released by the Institute for Supply Management (ISM), this report signals not only resilience but also positive momentum in various facets of the economy.

In August 2025, the Services PMI recorded a figure of 52%, a marked increase from July's 50.1%. This is notable as it indicates that the sector is firmly in expansion territory, having remained above the breakeven point for 13 out of the past 14 months. Steve Miller, the Chair of ISM’s Services Business Survey Committee, stated that the increase reflects broader trends of economic activity and consumer demand strengthening across various industries.

Key Highlights from the August Report

• - Business Activity Index: This index registered at 55%, an increase from 52.6% in July, showcasing a robust uptrend and reaffirming that the services sector has been on an upward trajectory since May 2020.
• - New Orders Index: A significant uptick was noted, climbing to 56%, up from July's 50.3%. This signals a strong demand and a potential for continued growth as businesses prepare for peak seasons, especially with the upcoming holiday period.
• - Employment Index: Despite the overall growth, the Employment Index remained in contraction territory, showing a reading of 46.5%, albeit slightly improving from 46.4% in July. This indicates that while businesses are optimistic about growth, they are still cautious about hiring amid consistent economic fluctuations.
• - Supplier Deliveries: The index for supplier deliveries was recorded at 50.3%, indicating stable performance even as there are signs of slower supply deliveries due to increasing demand.

Price Trends in the Sector

The Prices Index reflected ongoing inflationary pressures, registering at 69.2%. Although this was a slight decline from July's 69.9%, it indicates that prices have remained elevated, marking the ninth consecutive month above the 60% threshold. Industries such as Mining and Accommodation & Food Services reported heightened pricing pressures due to tariffs and supply chain constraints.

Insights from Industry Leaders

ISM's data reflects responses from various sectors, with firms indicating that the impact of tariffs has started to influence pricing strategies. Companies are becoming increasingly aware of how international trade policies may alter their cost structures and pricing models moving forward.

For instance, one respondent from the Accommodation and Food Services industry mentioned the rising costs of imported goods due to tariffs affecting their operational expenses significantly. Similarly, suppliers across different sectors have expressed concerns on managing the impact of tariff-related price adjustments in their quotations to clients.

Sector-Specific Performance

In terms of industry performance, twelve sectors reported growth in August. Notable industries include Information, Wholesale Trade, and Arts, Entertainment & Recreation, all of which experienced positive expansions driven by increased consumer activity and new projects. Conversely, sectors such as Accommodation & Food Services and Construction reported contractions, underscoring the varied impacts across different industries.

Conclusion

The August 2025 ISM Services PMI report conveys a mixed yet predominantly optimistic view of the U.S. services sector’s performance. This indicates potential for GDP growth, as the PMI figures typically align with an increasing Gross Domestic Product (GDP) rate. As businesses navigate the challenges posed by tariffs and fluctuating employment conditions, the overall sentiment remains focused on achieving sustainable growth. Monitoring trends in business activity, pricing, and employment will be crucial in the coming months as we approach a potential peak in consumer demand during the holiday season.