Services economy grows in August for third straight month, reports ISM
Summary
The ISM Services PMI rose to 52.0 in August (above 50 = growth), up from July’s 50.1 — marking the third consecutive month of expansion and the 13th time in 14 months the sector has grown. Key subindexes diverged: Business Activity/Production and New Orders strengthened, Employment remained in contraction, Supplier Deliveries slowed only slightly, Backlog of Orders fell further, and Prices eased but stayed expansionary. ISM panelists flagged tariffs and procurement timing as influential factors.
Key Points
- Services PMI at 52.0 in August, a 1.9-point gain from July’s 50.1.
- 12 services sectors reported growth, including Transportation & Warehousing, Information, Wholesale Trade and Health Care.
- Business Activity/Production = 55.0 and New Orders = 56.0 — both stronger for a third month.
- Employment = 46.5, still contracting, indicating hiring remains weak.
- Supplier Deliveries = 50.3 (slower deliveries but easing); Backlog of Orders fell to 40.4, contracting faster.
- Prices index fell 0.7 to 69.2 — prices are rising but at a slower rate than before.
- Tariffs are starting to show up in input costs; Imports (54.6) and Inventories (53.2) rose, signalling restocking activity.
- ISM committee cautions the rebound isn’t overwhelming; a small Fed rate cut might give modest positive sentiment but limited structural impact.
Context and relevance
This matters for anyone in supply chain, freight and warehousing: stronger New Orders and Activity suggest continued demand for logistics capacity, but declining backlogs and weak hiring temper expectations for sustained acceleration. Tariff-driven cost pressures and changed buying patterns could affect procurement, inventory strategies and pricing through the rest of the year, especially ahead of the holiday season.
Why should I read this?
Short version: it’s a quick health-check for demand and costs. If you manage capacity, labour or purchasing, this tells you orders are up but firms aren’t yet hiring — and tariffs are starting to bite. Read it to avoid being caught off-guard when customers restock or pass on higher costs. We’ve done the heavy lifting — worth a skim if you deal with logistics or procurement.
