6 Oct 2025
The latest PMI data for the US services sector indicates a significant slowdown, with overall figures falling below forecasts and previous months. Key indicators such as business activity, new orders, and employment show widespread contraction, signaling an economic environment teetering between growth and recession.
The August PMI data for the services sector was lower than both previous figures and forecasts, showing a decrease across almost all segments. The reported single-digit PMI number sits on the border between boom and recession, an occurrence not seen since January 2010.
Business activities fell below 50 for the first time since May 2020. While overall new orders decreased, the new orders index for September remained within its growth range. Export orders also experienced a decline.
Employment remained stable; however, the employment index registered below 50 for the fourth consecutive month and for the fifth time in the last six months.
The supplier deliveries index was recorded at 52.6, its highest level since February, and has been in a growth range for ten consecutive months. This index is inversely interpreted, with a reading above 50 indicating slower deliveries.
The prices index remained high at 69.14, staying above 60 for ten consecutive months, following a previous long period of 30 consecutive months above 60 from October 2020 to March 2023.
The inventories index fell below 50 in September after three months of growth, indicating contraction. The inventory sentiment index has stayed above 50 for 29 consecutive months. The backlog of orders index remained below 50 for seven consecutive months, recorded at 47, but showed a significant improvement of approximately 7 points, reaching its highest level since April, offering a positive signal.
The report highlights continued weakness in overall business activities and persistent sluggishness in employment. The US services sector appears to have stalled in September, with business activities decreasing for the first time since the COVID-19 era. Ten service industries, including accommodation, food services, and healthcare, reported growth, while seven others experienced recession or decline.
Businesses across various sectors reported experiencing the impact of tariffs, particularly on food products from India, China, and Southeast Asia, coffee from South America, and apparel and electronics from Asia. Annual costs are continuously increasing. Construction saw stagnant or decreasing housing project starts. Information technology faced new supply chain challenges for semiconductors and components, leading to longer delivery times and persistent price pressure. Professional services noted stable customer demand but prolonged decision-making due to economic uncertainty and interest rate concerns. The real estate market was generally stagnant, requiring cautious cost management. Retail reported stable costs with no supply or transportation delays. Wholesale businesses experienced weakened activity and demand, even in resilient markets.
With no other significant economic data scheduled for the day and no Non-Farm Payrolls (NFP) due to government analysis, the market is likely to be influenced by this report's findings.
The US services sector appears to have stalled, with business activities decreasing for the first time since the COVID-19 pandemic, painting a disappointing picture of the economy's largest segment.
| Metric | Status | Insight |
|---|---|---|
| Overall Services PMI (August) | Below Forecast & Previous | Single-digit, bordering boom/recession; first time since Jan 2010. |
| Business Activities | Below 50 | First decline below 50 since May 2020, indicates contraction. |
| Employment Index | Below 50 | Fourth consecutive month below 50; indicates contraction in hiring. |
| Supplier Deliveries Index | 52.6 (High) | Highest since Feb; above 50 indicates slower deliveries. |
| Prices Index | 69.14 (High) | Above 60 for 10 consecutive months; indicates persistent inflationary pressure. |
| Backlog of Orders Index | 47 (Below 50, but improved) | Below 50 for 7 months, but improved ~7 points to highest since April; a positive signal. |
| US Services Sector Outlook | Stalled/Weakened | Business activities decreased for the first time since the COVID-19 pandemic. |
| Industry-Specific Challenges | Persistent | Impacts from tariffs, supply chain issues, and economic uncertainty increasing costs. |
