#United States #Supply Chain #Tempe #Economic Activity #ISM Services PMI

ISM Services PMI Report - September 2025

The latest report from the Institute for Supply Management® (ISM) reveals that economic activity within the services sector remained stagnant in September 2025, with a Services PMI® reading of 50%. This marks a critical transitional juncture for the sector, as it represents the breakeven point between expansion and contraction, a scenario not seen since January 2010.

Key Highlights

The reported figure for September is 2 percentage points lower than August's reading of 52%. This decline reflects significant changes in the various components that contribute to the overall PMI score. For instance:

• - Business Activity Index: This index fell into the contraction zone, registering 49.9%. This is a notable 5.1 percentage point drop compared to August's 55%. It's the first time the activity index has reflected contraction since May 2020.
• - New Orders Index: Despite falling from 56% to 50.4%, new orders saw minimal expansion, albeit down from previous figures.
• - Employment Index: The sector continues to face workforce challenges, with the Employment Index at 47.2%, marking its fourth consecutive month in contraction.
• - Supplier Deliveries Index: Interestingly, this index indicated improved supplier performance, registering 52.6%, suggesting slower delivery times over previous months – a potential sign of economic recovery.

Economic Commentary

Steve Miller, Chair of the ISM Services Business Survey Committee, commented on the mixed signals within the report. Despite the unchanged PMI, the contractions in business activities and employment suggest that companies are navigating significant headwinds.

Industry Performance

The report indicates that out of the various sectors:

• - Ten industries reported growth, with Accommodation & Food Services leading the way, followed by Health Care & Social Assistance, and Information sectors.
• - Conversely, seven industries are reported to be contracting, including Mining, Construction, and Retail Trade.

Respondent Insights

Comments from business leaders across different sectors reveal critical insights:

• - Accommodation & Food Services expresses concern over rising tariffs impacting costs, particularly for imported food products.
• - Construction continues to struggle with high housing values and tariffs affecting material costs.
• - Healthcare sectors are facing challenges related to rising pharmacy costs and medical devices due to prolonged negotiations.
• - Professional, Scientific and Technical Services note that while demand remains steady, decision-making is slowed due to economic uncertainties.

Price Movement and Inventory Sentiment

The Prices Index remains elevated at 69.4%, marking 10 consecutive months of exceeding 60%. This indicates inflationary pressures persist within the services sectors as many companies report cost increases across various commodities.

Moreover, the Inventories Index fell to 47.8%, indicating a contraction in inventory levels following three months of expansion, as businesses hesitate to overstock amid fluctuating demand.

As we navigate the remainder of 2025, this report provides a crucial snapshot of the services sector, reflecting ongoing shifts and challenges faced by industries. The resilience of certain sectors amidst contraction indicates underlying strengths which may forecast a potential recovery when market conditions stabilize.

Understanding these dynamics is essential for businesses as they strategize moving forward in these uncertain economic times.