ISM: Services PMI slips to 54.5 in October, but order backlogs hit their highest since July 2022 and supplier deliveries slow
Transportation & Warehousing led the industries reporting growth, higher new orders and higher employment, while its order backlogs fell.
The U.S. services sector kept growing in October, but at a slower pace. The Institute for Supply Management's Services PMI registered 54.5, down 0.4 point from 54.9 in September. It is the 28th straight month above 50.
The headline readings
Business Activity fell 2.7 points to 53.8 from 56.5. New Orders dropped 3.9 points to 55.9 from 59.8. Employment rose 1.3 points to 51.4, its second straight month above 50. Supplier Deliveries rose to 56.7 from 53.2, and Prices eased to 73.0 from 74.0.
Supplier Deliveries is the one index that runs in reverse: above 50 means slower deliveries. October's 56.7 was the 23rd straight month of slower performance, and no industry reported faster deliveries.
Backlogs and prices
The Backlog of Orders Index rose to 58.0, its highest since July 2022 (58.3) and its ninth straight month in expansion. ISM's committee chair, Steve Miller, said commentary about supply chain constraints increased significantly from September, though the number of commodities reported in short supply dropped from seven to three, all tied to computer technology.
The Prices Index stayed high at 73. Prices paid have risen for 113 straight months. ISM said fuel was reported up in price for a ninth month in a row, and diesel for an eighth. Respondents again named tariffs and fuel costs as the most-cited pressures on their supply chains.
Where transportation sits
Transportation & Warehousing was first on ISM's list of industries reporting growth in October. It was also first for new orders and for employment increases, and second, behind Other Services, for higher prices paid. It was among the three industries reporting lower order backlogs; the other two were Construction and Other Services.
ISM said the second straight monthly gain in employment, to 51.4, may be a sign that help is coming for slower deliveries and growing backlogs.
Why freight watchers care
The report covers the U.S. services economy, not trucking alone. But the mix is one carriers and shippers will recognize: demand still growing, deliveries slower, costs rising. Fifteen of 17 industries reported growth in October, two more than in September.
The next Services PMI, covering November, is due on December 3.