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Service sector expands in August
Price gauge jumps to 4-year high
Food services reported growth in August. (semenovp/Getty Images))
Key Takeaways:
- The U.S. service sector expanded in August at the fastest pace in six months as the ISM services index rose 1.3 points to 55.4.
- Growth was driven by the strongest new-orders pace since early 2023 and the highest business-activity reading since 2022, while prices paid climbed to a mid-2022 high.
- Employment contracted for the fifth time in six months and supplier delivery times eased, suggesting labor pressures persist even as some supply bottlenecks improve.
The U.S. service sector expanded in August by the most in six months, bolstered by strong demand and a pickup in business activity.
The Institute for Supply Management’s services index rose 1.3 points to 55.4, the highest level since February, according to data released Sept. 3. That exceeded the median estimate in a Bloomberg survey of economists. Readings above 50 indicate expansion.
New orders growth accelerated to the fastest pace since early 2023 while a measure of business activity was the strongest since 2022. Order backlogs expanded for the seventh consecutive month.
Twelve services industries reported growth in August, including mining, real estate and accommodation and food services. Five industries reported contraction.
U.S. service industries have been helped by resilient consumer spending, a stable job market and healthy business investment. But they’ve also had to navigate supply chain disruptions, tariffs and rising costs across the economy.
ISM’s measure of prices paid for materials and services in the sector climbed to 72.6 in August, the highest since mid-2022.
.@ISM Services PMI® Report: The sector that makes up most of the #economy might have received a back-to-school boost in August, as demand expanded at an even faster rate, but #employment and prices were still pains. The #ISMPMI was up 1.3 points, to 55.4%. https://t.co/BtpJRriaOX
— Institute for Supply Management (@ism) September 3, 2026
While inflation is well below its 2022 levels, measures of consumer and producer prices have climbed since the start of the Iran war in February and remain elevated, pressuring many businesses.
“Petroleum-related products, diesel, and gasoline were again reported as up in price in August,” Steve Miller, chair of ISM’s Services Business Survey Committee, said in a statement. “Graphics processing units (GPUs) and steel were added as commodities in short supply.”
High prices could be one reason businesses are reducing head counts. ISM’s employment gauge has signaled contraction in five of the last six months.
Supplier delivery times remained in expansionary territory but the group’s measure fell to the lowest level in nearly a year, a possible sign that bottlenecks are slowly easing.
