The ISM Services PMI is a monthly survey index that summarizes whether activity across U.S. service businesses is broadly improving or weakening. A reading above 50 generally signals expansion and one below 50 contraction—but the figure is not a percentage change in output. Its four equally weighted components are Business Activity, New Orders, Employment, and Supplier Deliveries; the last runs in reverse, so a reading above 50 means deliveries are getting slower.
What the ISM Services PMI measures
The Institute for Supply Management (ISM) asks purchasing and supply executives about changes in their organizations’ U.S. operations compared with the previous month. Its Services Business Survey Panel spans service industries classified under the North American Industry Classification System (NAICS), with responses weighted by each industry’s contribution to GDP. ISM describes the responses as raw data that are not changed. The national report covers the United States; regional purchasing reports are separate and do not feed into it. ISM’s Services Report on Business explains the survey and its scope.
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The headline is a diffusion index: it summarizes the direction and breadth of reported change, rather than measuring the size of that change. ISM describes diffusion indexes as “convenient summary measures showing the prevailing direction of change and the scope of change.” For example, a reading of 54.9 does not mean service output rose 4.9 percent.
How ISM calculates the headline
The Services PMI averages four component indexes equally. Business Activity, New Orders, and Employment are seasonally adjusted; Supplier Deliveries is included as its own index. ISM’s 2026 calculation instructions specify calculating each unadjusted diffusion index to one decimal place, dividing by its projected seasonal factor, rounding each quotient to one decimal place, and then averaging the four. Rounding means a hand calculation may not exactly match the published headline.
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Seasonal adjustment accounts for recurring effects such as weather, institutional arrangements, and holidays that do not move from year to year. ISM’s 2026 factors took effect with January reports. ISM used X-13-ARIMA for revisions covering January 2023 through December 2025 and for projected 2026 factors; it said the 2026 factors would be recalculated once actual data are available in early 2027. See ISM’s report methodology and its 2026 seasonal-adjustment explanation.
What the component indexes tell you
| Index | What it helps show | How to read it |
|---|---|---|
| Business Activity | Whether respondents report activity at their organizations rising or falling | Above 50 generally indicates more respondents reported increases than decreases; below 50 indicates the reverse. |
| New Orders | Direction of incoming demand | Read around 50 using the usual expansion/contraction shorthand; compare its direction with the headline. |
| Employment | Whether service organizations are adding or reducing employment | Above 50 generally signals more reports of increases than decreases, not a measured hiring rate. |
| Supplier Deliveries | Whether suppliers are delivering faster or slower | Above 50 means slower deliveries; below 50 means faster deliveries. |
| Prices | Direction of prices paid by respondents | A high reading indicates widespread reports of increases relative to decreases; it is not an inflation percentage. |
The report also publishes Backlog of Orders, New Export Orders, Inventory Change, Inventory Sentiment, and Imports. These add context but are not part of the four-index headline. Prices is also a separate contextual measure, not a headline component. The full set of reported indexes and their definitions appears in ISM’s Services Report on Business.
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How to interpret a reading
Use 50 for the services-sector direction
Above 50 generally means service-sector activity is expanding; below 50 generally means it is contracting. The distance from 50 can indicate how broadly increases or decreases were reported, but it does not give the percentage growth or decline in output.
Keep the separate GDP threshold separate
ISM cites 48.1 as the historical Services PMI threshold associated over time with expansion or decline in the overall economy. That relationship is not the same as the usual 50 dividing line for expansion or contraction in services activity. ISM’s threshold is a historical relationship, not a GDP release or a guarantee of what GDP will do in a given month. ISM’s methodology describes the distinction.
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Remember the Supplier Deliveries reversal
Most PMI indexes use above 50 to indicate that increases are more prevalent than decreases. Supplier Deliveries instead measures delivery speed: above 50 means slower deliveries, while below 50 means faster deliveries. A higher reading can therefore reflect worsening delivery performance rather than stronger activity.
What the September 2026 report showed
The latest report in this article’s date context is September 2026. ISM reported a headline Services PMI of 54.9, indicating continued expansion, with mixed signals across the components. The September 2026 ISM report gives the readings and month-to-month changes.
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| Index | September 2026 reading | Change from August 2026 | Interpretation |
|---|---|---|---|
| Services PMI | 54.9 | Not stated | Expansion overall. |
| Business Activity | 56.5 | Down 5.2 points | Activity remained in expansion, though its index fell. |
| New Orders | 59.8 | Down 1.1 points | Expansion; ISM said it was the 16th consecutive month in expansion. |
| Employment | 50.1 | Up 2.3 points | Just above the expansion/contraction dividing line. |
| Supplier Deliveries | 53.2 | Up 1.9 points | Slower deliveries for the 22nd consecutive month. |
| Prices | 74.0 | Up 1.4 points | More respondents reported higher prices than lower prices; ISM said prices paid had increased for the 112th consecutive month. |
These figures are diffusion-index readings, not rates of monthly output growth, hiring, or inflation. ISM also said the September headline reading of 54.9 corresponded, based on its historical relationship with the overall economy, to a 2.1 percentage-point increase in real GDP on an annualized basis. This is an ISM model-based relationship statement, not a Bureau of Economic Analysis estimate or a direct measurement of September GDP.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.A practical way to compare monthly reports
- Check the headline against 50. Note whether activity is in expansion or contraction, then compare the reading with the previous month. A declining headline can still be above 50, which means expansion at a slower pace rather than contraction.
- Look at New Orders. This helps distinguish a shift in incoming demand from a change concentrated in other parts of the survey.
- Check Employment separately. Identify whether the index is above or below 50 rather than treating the headline as a hiring measure.
- Reverse the usual shorthand for Supplier Deliveries. Determine whether the index signals slower or faster deliveries before interpreting its contribution.
- Read Prices as input-cost pressure. It provides a separate signal about prices paid, not an inflation rate and not part of the headline calculation.
- Use the industry detail for breadth. Component and industry readings can show whether a headline change is widespread or concentrated.
When comparing the Services PMI with ISM’s Manufacturing PMI or another provider’s PMI, account for differences in survey scope, components, weighting, and interpretation. A number from one survey should not automatically be treated as directly equivalent to the same number from another.
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When the report is released—and what it cannot tell you
ISM sends the survey in the first part of each month, collects responses through most of the month, and releases the report on the third business day of the following month. It summarizes respondents’ assessments of change at their own organizations. ISM advises readers to consider it alongside other economic data when making decisions. A survey diffusion index is useful for tracking direction and breadth, but it is not a census of every business, a direct measure of national output, or a substitute for official GDP, employment, or inflation statistics. ISM’s report page provides the release and methodology details.
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