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ISM reported that Construction was in contraction for a second consecutive month in September 2026, while its overall Services PMI remained in expansion at 54.9%. Steve Miller, then chair of ISM’s Services Business Survey Committee, said higher capital and financing costs would directly affect residential housing. The report describes survey conditions and opinions; it does not quantify how much interest rates changed home sales or construction.
What did ISM report about construction?
In its coverage of the September 2026 Services Business Survey, the Institute for Supply Management (ISM) said Construction reported contraction for a second consecutive month. The release also identified Construction as the only industry reporting lower new orders for a second month in a row. ISM published its related coverage on October 6, 2026; its report release followed on October 5.
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These are industry-level findings within ISM’s Services PMI survey. They are not national measurements of homebuilding, housing sales, permits, starts, or construction spending. The cited report does not provide a numerical Construction-specific index reading, so there is no Construction percentage to compare with the overall PMI.
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1Repair Windows errors before they cause bigger problems2Scan for outdated or missing drivers - takes under a minute3Clear out junk files and repair common Windows errorsWhat did Miller say about interest rates and housing?
Steve Miller, CPSM, CSCP, was chair of ISM’s Services Business Survey Committee when the September report was issued. ISM quoted him saying: “It will definitely have a direct impact for residential housing in the construction industry.” He was referring to higher capital costs and their effect on investment.
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Miller also said, “That’s an area where we’re already seeing an impact (of increased product and financing costs),” and added, “and I expect it to continue.” These are his assessments of how rising costs may affect residential construction, not a measured estimate of the effect of mortgage rates on the housing market.
How does the construction finding compare with the overall Services PMI?
The overall Services PMI registered 54.9% in September, down from 55.4% in August. ISM’s usual threshold is 50%: a reading above it indicates expansion and one below it indicates decline for the applicable index. That overall result and the Construction industry finding describe different levels of the survey, so they are not contradictory.
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| Measure | September 2026 finding | What it describes |
|---|---|---|
| Services PMI | 54.9%, down from 55.4% in August | Overall Services survey conditions; above 50% indicates expansion. |
| Business Activity Index | 56.5% | Overall Services business activity, not Construction alone. |
| New Orders Index | 59.8% | Overall Services new orders; Construction was separately identified as the only industry with lower new orders for a second consecutive month. |
| Construction | Reported in contraction for a second consecutive month; no numerical reading stated | An industry-level finding in the Services PMI context, not a national construction-output statistic. |
ISM explains the 50% threshold for applicable indexes; Supplier Deliveries is an exception. The Business Activity and New Orders figures above are overall Services measures and should not be treated as Construction readings.
What did survey respondents say about mortgage rates?
The release included respondent comments connecting rates with housing activity. One said, “Home sales are slowing as mortgage rates increase and inventory shrinks.” Another said, “Interest rates continue to drive buyers out of the market.” These remarks report respondents’ views, not ISM’s independently verified causal findings.
The comments do not isolate mortgage rates from inventory or other possible influences, and neither ISM source quantifies the size of any rate-related effect. To assess national housing trends, these survey findings would need to be considered alongside separate housing data; the cited report itself does not supply those measures.
Quick Recap
Sources
- Institute for Supply Management, “ISM® PMI® Reports Roundup: September Services,” October 6, 2026
- Institute for Supply Management via PR Newswire, “Services PMI® at 54.9%; September 2026 ISM® Services PMI® Report,” October 5, 2026
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