US Services PMI Rises on Improved Employment

In October, the Services PMI rose to 56%, up 1.1 points from September's 54.9%, marking the eighth expansion this year.

The Business Activity Index registered 57.2%, a 2.7-point decrease from September’s 59.9%, indicating ongoing growth with a modest slowdown. Similarly, the New Orders Index slipped to 57.4%, down 2 points from the previous month’s 59.4%.

The Employment Index returned to expansion with a reading of 53%, increasing by 4.9 points from September’s 48.1%, marking its third expansion in four months. Meanwhile, the Supplier Deliveries Index rose to 56.4%, up 4.3 points from September’s 52.1%, reflecting slower supplier delivery times for a second consecutive month—a common trend when demand strengthens and the economy improves. (Note: The Supplier Deliveries Index is inversely correlated, with readings above 50% signaling slower delivery performance.)

The Prices Index eased to 58.1%, down 1.3 points from September’s 59.4%, indicating a slight slowdown in price increases. The Inventories Index registered at 57.2%, dropping 0.9 points from the previous month, marking its third consecutive month of expansion after two months of contraction. Meanwhile, the Inventory Sentiment Index expanded for the 18th straight month but hit a low of 53%—its lowest reading in this period, down 1 point from September. The Backlog of Orders Index remained in contraction for a third month, declining by 0.6 points to 47.7%.

Fourteen industries saw growth in October, two more than in September, while the Services PMI has now expanded in 20 of the past 22 months since January 2023. October’s PMI is 3.7 points above the 2024 average of 52.3%.

According to Miller, October's rise in the Services PMI was mainly driven by notable improvements of over 4 points in both the Employment and Supplier Deliveries indexes, though the Business Activity and New Orders indexes each fell by at least 2 points. All four subindexes remain above their 2024 averages. The Supplier Deliveries Index’s expansion reflects slower delivery times, typically an indicator of growing demand. While panelists expressed concerns about political uncertainty, many noted that disruptions from hurricanes and the brief longshoremen’s strike at ports were less severe than initially expected.

Source: ISM

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