America's service economy — the restaurants, hospitals, hotels, trucking and warehousing firms, banks and tech companies that employ most of the country — kept growing in October, but it grew more slowly, ordered less, and paid prices that stayed stubbornly close to their highest levels in years. The Institute for Supply Management (ISM) reported on Wednesday morning that its Services PMI registered 54.5 percent in October, down 0.4 point from September's 54.9 percent and just below the roughly 54.7 to 54.8 percent economists expected. Any reading above 50 means expansion, and October was the 28th consecutive month above that line — but the detail inside the report, issued at 10 a.m. Eastern on the third business day of the month, is a story of an economy that is strong and inflationary at the same time, two days before the government's official October jobs report.
Source: ISM Services PMI Report, October 2026, via PR Newswire (Nov. 4, 2026)
Growth slowed, but it did not stall
The slowdown was led by the two forward-looking parts of the survey. The Business Activity Index fell 2.7 points to 53.8 percent, and the New Orders Index fell 3.9 points to 55.9 percent — still growing, but at the softest pace in months, and new orders are now below their 12-month average. Steve Miller, chair of ISM's Services Business Survey Committee, noted that the headline reading of 54.5 percent sits 0.2 point above its 12-month average of 54.3 percent, and that by ISM's long-running relationship the October reading corresponds to about a 2-percentage-point increase in real GDP on an annualised basis. ISM says a Services PMI above 48.1 percent over time generally signals expansion of the overall economy, which by that measure has now grown for 77 straight months. Fifteen of the 18 services industries reported growth in October, two more than in September.
Jobs were the bright spot
Hiring was the one part of the report that accelerated. The Employment Index rose 1.3 points to 51.4 percent, its second consecutive month in expansion territory and 2.1 points above its 12-month average of 49.3 percent. Miller suggested the second straight reading above 50 may mean help is on the way for the survey's strained delivery and backlog numbers. The services reading landed the same morning as the ADP report showing private employers added 86,000 jobs in October, and two days before the Bureau of Labor Statistics publishes the official October payroll figures on Friday, November 6, at 8:30 a.m. Eastern — the release markets treat as the month's definitive jobs verdict.
Prices: the problem that will not cool
The Prices Index eased 1 point to 73.0 percent, but it has now registered above 70 percent for the seventh time in eight months, above 60 percent for 23 straight months, and its 12-month average rose to 69.2 percent — the highest since April 2023. No commodity at all was reported down in price in October. Fuel was reported up in price for a ninth straight month, diesel fuel for an eighth, and memory products for a tenth. Miller said tariffs and fuel costs continued to be the most-cited issues affecting respondents' supply chains, and warned that many firms say they have not yet seen the full impact of those cost increases, or have not yet passed them on to customers — which, in his reading, means more pricing pressure is on the way if oil and tariff costs are not mitigated, even if they do not rise further.
Services are the largest and stickiest part of US inflation: rent, insurance, healthcare, transport and eating out do not cool the way goods prices do. A prices index at 73.0 while growth holds at 54.5 is the combination that argues against rate cuts — and markets have been pricing a strong chance that the Federal Reserve, which held its benchmark rate at 3.75 to 4.00 percent on October 28, could even raise rates at its December 8-9 meeting, with its preferred inflation gauge at 3.6 percent in September. Friday's payroll report and the October consumer price figures due November 10 are the next two tests.
Backlogs and deliveries show the strain underneath
Two less-watched indexes explain why the expansion feels strained on the ground. The Backlog of Orders Index rose 1.4 points to 58.0 percent — its highest reading since July 2022, when it registered 58.3 percent — meaning firms are falling further behind on work already booked. The Supplier Deliveries Index jumped 3.5 points to 56.7 percent, the second-highest reading in that same period, exceeded only by April 2026's 56.8 percent; because this index is inverted, a higher reading means deliveries are getting slower, not faster. Inventories eased 2.4 points to 55.4 percent, while New Export Orders snapped back 8.3 points to 55.2 percent after one month in contraction, and Imports rose to 54.2 percent. For the first time since February 2026, all 10 indexes in the survey were in expansion territory at once. Commodities in short supply fell from seven to three, all of them computer-related: computers and related products, memory components and wire and cable.
A second survey tells the same story, louder
S&P Global's separate services survey, published the same morning and summarised by the London Stock Exchange's news service, pointed the same way with bigger swings: its US Services index fell to 56.1 from 58.8 in September, below its earlier flash reading of 57.9, and its Composite index — services plus manufacturing — fell to 55.9 from 58.4, the lowest in three months, while remaining, in S&P's words, comfortably above the 50 no-change mark and the strongest among major economies. S&P's chief business economist Chris Williamson said the October surveys point to GDP rising at an annualised rate of over 4 percent, led by the technology sector, but that business optimism fell sharply on worries about affordability, interest rates and the political environment, and that average prices charged for services rose at one of the fastest rates in about four years. The ISM survey likewise found fuel costs driving operating expenses higher for many firms.
Who grew, who shrank — and what firms are saying
The 15 industries reporting growth in October, in ISM's order, were led by Transportation & Warehousing — the industry that includes much of America's trucking and logistics — followed by Wholesale Trade, Information, Retail Trade, Arts, Entertainment & Recreation, Finance & Insurance, Other Services, Real Estate, Rental & Leasing, Accommodation & Food Services, Agriculture, Utilities, Educational Services, Management of Companies, Professional, Scientific & Technical Services and Public Administration. Only two industries contracted: Construction, and Health Care & Social Assistance. The voices inside the report are blunt about costs. A Finance & Insurance respondent said the price of diesel has impacted the firm's commercial trucking business. A Retail Trade respondent said tariffs are causing havoc with international merchandise sourcing. A Wholesale Trade respondent described tariff policy as the main driver of landed cost, with elevated ocean freight and expected East Coast port congestion in November. An Accommodation & Food Services respondent cited fuel and freight pressure on distribution costs and wheat prices up 30 percent year over year.
What it means for diaspora families and truckers
Services are where most Punjabi diaspora workers in the United States actually work — in transportation and warehousing, healthcare, hospitality, retail and food services — so an employment index rising for a second month is direct, practical good news for job-hunters and for families whose hours depend on those industries. The caution runs the other way on costs: with the prices index at 73.0, diesel up for an eighth straight month in the survey and firms openly saying they have not yet passed their full cost increases through, households should expect service prices — insurance, freight, repairs, eating out — to keep rising into the winter rather than easing. For truckers and small fleet owners, the report cuts both ways in a single line: the industry that carries their freight was the fastest-growing in America in October and backlogs are at a four-year high, which supports rates, while fuel remains the cost most often named as squeezing margins.
What happens next
The next verdict arrives quickly. The Bureau of Labor Statistics publishes October payrolls on Friday, November 6, at 8:30 a.m. Eastern, followed by October consumer price figures on November 10 and third-quarter productivity data the day before that. The Federal Reserve meets on December 8-9, and the combination in this report — growth intact, hiring improving, prices above 70 — is precisely the mix that keeps a December rate hike in play in market pricing. ISM publishes its November services report in early December; the numbers to watch are whether new orders recover from 55.9, whether backlogs stay near their four-year high, and whether the prices index finally breaks below 70 — the threshold it has crossed in only one of the last eight months.