The U.S. services sector showed renewed strength in August 2025, with the ISM Services PMI climbing to 52 from 50.1 in July, beating expectations of 51. This marks the fastest expansion in six months, highlighting resilience in the economy’s largest sector despite persistent headwinds.

Business activity rose to 55 from 52.6, while new orders surged to 56 from 50.3, reflecting solid demand and stronger client engagement. Inventories also edged higher, reaching 53.2 from 51.8, suggesting companies are preparing for more activity in the months ahead.

Challenges, however, remain in focus. Employment weakened further to 46.5, signaling continued labor shortages. Backlogs of orders dropped sharply to 40.4, the lowest level in 16 years, indicating demand is being worked through faster than it is building. 

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