The U.S. service sector expanded in October at the slowest pace in three months amid continuing cost pressures, as the Institute for Supply Management's services index fell 0.4 point to 54.5.
The report, released November 4, points to an economy still growing with limited relief from the costs confronting businesses. A reading above 50 indicates growth, and October marked the 28th consecutive month of expansion for the services sector, which makes up more than two-thirds of U.S. economic activity.
New orders fell to 55.9 from 59.8, and business activity eased to 53.8 from 56.5. Employment strengthened to 51.4 from 50.1, its highest since February, while supplier deliveries slowed further, with that index rising to 56.7 from 53.2. The backlog of orders climbed to 58.0%, its highest level since July 2022.
The measure of prices paid for materials and services eased to 73.0 from 74.0 in September, but it was the second-highest reading since mid-2022 and the seventh reading above 70% in eight months. Prices paid by services firms have now risen for a 113th consecutive month. Steve Miller, chair of ISM's Services Business Survey Committee, said tariffs, fuel costs and delivery delays were straining businesses.
Miller said all 10 of the survey's indexes were in expansion territory, the first time that has happened since February 2026. Based on its past relationship with the overall economy, the October services reading corresponds to a 2-percentage-point annualized increase in real gross domestic product. ISM will release its November services report on December 3.
