The ISM Services index surprised analysts by rising to 56.0 in October, exceeding the expected pullback to 53.8. This marks the highest level since July 2022. The employment sub-index also saw a significant increase of 4.9 points to 53, reversing the trend of weaker readings in recent months.
Although the new orders and business activity indexes experienced slight decreases in October, they both remain comfortably above their respective twelve-month averages. The prices paid sub-component dipped slightly to 58.1, while supplier delivery times reached a 27-month high of 56.4.
In October, fourteen services industries reported growth, including Retail Trade, Information, Transportation & Warehousing, and Finance & Insurance. However, Other Services and Management of Companies & Support Services were the only two industries to report a contraction.
The rise in the employment sub-index suggests that the soft job numbers from the previous week may have been impacted by external factors such as weather events like Hurricane’s Helene and Milton. Additionally, the recent increase in supplier delivery times can be attributed to weather events and the short-lived port strike from the previous month.
Looking at the bigger picture, service spending has remained consistent throughout the year, with annualized rates of change holding steady at 2.5% as of September. The healthy levels of new orders and business activity indicate that consumer spending will continue to be a strong driver of growth in the fourth quarter and beyond.
Overall, the ISM Services index reaching a 27-month high in October is a positive sign for the economy, indicating resilience and stability in the services sector. With various industries showing growth and key indicators remaining strong, the outlook for the economy looks promising in the coming months.
