America's service economy picked up speed in August. ISM's services index rose to 55.4, up 1.3 points from July, signaling growth and marking the best reading since February. The print topped Bloomberg's median economist estimate. For context, numbers above 50 indicate expansion.
Demand has some real momentum. Business activity hit its highest mark since 2022, while new orders advanced at the quickest rate since early 2023. Backlogs of orders increased for a seventh consecutive month.
Price pressures heated up again. ISM's prices-paid index rose to 72.6 in August, a level last seen in mid-2022. Inflation is well below its 2022 peaks, but gauges of consumer and producer prices have been climbing since the Iran war began in February and remain elevated, squeezing many firms.
As Steve Miller, who chairs ISM's Services Business Survey Committee, put it: "Petroleum-related products, diesel, and gasoline were again reported as up in price in August," and "Graphics processing units (GPUs) and steel were added as commodities in short supply." Supplier delivery performance stayed in growth territory, though the delivery measure eased to its lowest in nearly a year, hinting that bottlenecks may be loosening. ISM's employment index has been in contraction in five of the past six months, suggesting some firms are trimming staff as costs bite.
When economic activity feels busy, steady contributions matter, so download our free Always Be Buying E-Book to learn
Service companies are benefiting from resilient consumer spending, a steady job market, and ongoing business investment, even as they juggle supply-chain snags, tariffs, and higher input costs. That combo points to solid top-line demand with margin pressure lurking. Watch how pricing power, hiring updates, and delivery times show up in the next few earnings calls - they will tell you whether companies are passing along costs or absorbing them.
