Services Activity Accelerates in August While ISM's Price Gauge Climbs to Its Highest Since 2022

by Alina Castellanos · September 3, 2026

Economics Correspondent, US Market Current

The largest slice of the U.S. economy sped up in August, and it got more expensive at the same time. The Institute for Supply Management said Thursday that its Services PMI registered 55.4% last month, up 1.3 percentage points from July's 54.1% and the 26th consecutive month the index has been in expansion territory. Readings above 50% indicate the services sector is growing.

The print came in ahead of forecasts. InvestingLive, which logged the release at 14:00 UTC — 10 a.m. ET — put the consensus estimate at 54.2%.

The strength was concentrated in the demand-side subindexes. ISM's Business Activity Index jumped 2.6 points to 61.7%, which the release describes as its highest reading since November 2022, when it hit 62.7%. New Orders rose 3.7 points to 60.9%, characterized in the report as the best since February 2023's 61%. Backlog of Orders swung to 55.6% from 50.9%, New Export Orders rose to 56.3% from 52%, and Inventories climbed to 56.7% from 51.4%.

"In August, the Services PMI registered 55.4 percent, an increase of 1.3 percentage points compared to July's figure of 54.1 percent," Steve Miller, chair of the ISM Services Business Survey Committee, said in the release. "The Business Activity Index remained in expansion territory in August, increasing 2.6 percentage points to 61.7 percent from July's reading of 59.1 percent."

The price line keeps climbing

The complication for policymakers sits one row down. ISM's Prices Index registered 72.6% in August, up 2.3 points from 70.3% in July, and the report says it has now increased for 111 consecutive months. ISM describes the August level as its highest since August 2022, when the index also printed 72.6%, and notes it was the fifth time in six months the measure has topped 70%. The trailing 12-month average of 68.5% is, per the release, the highest since April 2023.

That streak has been visible for months. Writing in June, analyst Mike Shedlock flagged that the services prices gauge had risen for 108 straight months at that point and had spent 18 consecutive months above 60%, with respondents repeatedly citing petroleum-linked costs. The August panelist comments in ISM's release point in a similar direction: one respondent in Finance and Insurance cited rising health care costs and regulatory complexity as reasons for cautious purchasing, and the report notes tariffs and Middle East conflict returned as the most-cited supply chain issues.

Hiring is the soft spot

The Employment Index was the outlier, registering 47.8% — up 0.4 points from July but still below the 50 breakeven, and contracting for a second consecutive month. ISM notes the index has been below 50% in 13 of the last 18 months. One mildly encouraging detail: the share of companies reporting staff reductions slipped to 17.1% in August from 19% in July.

That pattern of solid demand alongside soft hiring echoes ADP's Sept. 2 estimate that private payrolls grew 38,000 in August, below the 47,000 forecast cited in Kiplinger's Sept. 2 preview. The Labor Department's August employment report is scheduled for release Friday morning and has not yet been published.

Breadth was wide but not universal. Twelve services industries reported growth in August, including Mining; Real Estate, Rental and Leasing; Accommodation and Food Services; Wholesale Trade; Retail Trade; Information; and Transportation and Warehousing. Five reported contraction: Agriculture, Forestry, Fishing and Hunting; Construction; Management of Companies and Support Services; Finance and Insurance; and Health Care and Social Assistance. A Retail Trade panelist told ISM that back-to-school sales lifted order counts and that accounts were beginning to restock for the holidays.

ISM translates the headline number into growth terms: a Services PMI of 55.4% corresponds to a 2.3-percentage-point increase in real gross domestic product on an annualized basis, according to the release. Over the past 12 months the index has averaged 53.7%, with a high of 56.1% in February 2026 and a low of 50.3% in September 2025.

Rates and the September meeting

Yields held near the top of their recent range through the release. InvestingLive, in a post timestamped 14:00 UTC — 10 a.m. ET — quoted the 2-year Treasury yield at 4.327% and the 10-year at 4.754%. U.S. trading was still under way, and those are intraday quotes rather than closing levels. A day earlier the 10-year had reached an intraday high of 4.814%, which TheStreet reported was its highest level since November 2023. Equities still rose in that Wednesday session, with TheStreet describing the S&P 500 and the Dow as jumping after back-to-back losing days.

The Federal Open Market Committee has held its target range at 3.50% to 3.75% for five straight meetings, most recently on July 29, when the vote was 9-3 with Beth Hammack, Neel Kashkari and Lorie Logan preferring a quarter-point increase, according to a summary of the decision published by Advisor Perspectives. The committee next meets Sept. 15-16. As of 08:11 UTC Thursday, InvestingLive put market-implied odds of a September hike at 58%, adding that in its reading only a soft consumer price report would push that below 50%.

Two data points stand between now and that meeting's blackout period: Friday's August employment report and the August CPI release scheduled for next week. Thursday's services numbers did little to resolve the tension between them — demand and prices firmed, hiring did not.