ISM Services PMI
ISM Services PMI is a monthly diffusion index measuring U.S. non-manufacturing (services) sector activity. Because the U.S. is heavily service-driven, with services comprising roughly 70–80% of total GDP, this index captures the health of the dominant part of the domestic economy.
At A Glance#
| Field | Detail |
|---|---|
| Provider | Institute for Supply Management (ISM) |
| Survey / Tool | Report on Business (ROB) — Services Survey |
| Frequency | Monthly — released on the third business day of the month |
| Indicator Type | Leading |
| Main Use | Gauges the health of the U.S. services sector, which accounts for approximately 70–80% of the total economy |
| Timeframe Tracked | Short-Term (1–6 months) |
| Source | https://www.ismworld.org/supply-management-news-and-reports/reports/ism-pmi-reports/services/january/ |
What It Is#
ISM Services PMI is a monthly diffusion index measuring U.S. non-manufacturing (services) sector activity. Because the U.S. is heavily service-driven, with services comprising roughly 70–80% of total GDP, this index captures the health of the dominant part of the domestic economy.
For how PMI and the diffusion index formula work, see PMI Diffusion Index Explained.
Who Provides It#
The Institute for Supply Management (ISM), via the Report on Business (ROB) Services Survey.
How It Is Collected#
- ISM sends surveys to its Services Business Survey Panel in the first part of each month.
- Respondents report on U.S. operations only for the current month.
- The panel is diversified by NAICS industries, weighted based on each industry's contribution to GDP.
- Respondents indicate whether each activity has increased, stayed the same, or decreased compared with the previous month.
Industries covered:
- Agriculture, Forestry, Fishing & Hunting
- Mining
- Utilities
- Construction
- Wholesale Trade
- Retail Trade
- Transportation & Warehousing
- Information
- Finance & Insurance
- Real Estate, Rental & Leasing
- Professional, Scientific & Technical Services
- Management of Companies & Support Services
- Educational Services
- Health Care & Social Assistance
- Arts, Entertainment & Recreation
- Accommodation & Food Services
- Public Administration
- Other Services
How It Is Computed#
ISM calculates diffusion indexes for a wide range of sub-indicators including Business Activity, New Orders, Employment, Supplier Deliveries, Inventories, Prices, Backlog of Orders, New Export Orders, Imports, and Inventory Sentiment.
The headline ISM Services PMI is an equal-weighted composite of four sub-indexes, each carrying 25% weight:
| Sub-Index | Weight | What It Captures |
|---|---|---|
| Business Activity | 25% | Current level of services output — closest to coincident |
| New Orders | 25% | Demand pipeline — most forward-looking component |
| Employment | 25% | Hiring and staffing decisions in services firms |
| Supplier Deliveries | 25% | Delivery speed; slower = capacity pressure |
Reading the number:
- Above 50 → services sector generally expanding
- Below 50 → services sector generally contracting
Indicator Type#
Leading. ISM Services PMI captures changes in business activity, new orders, employment, and supplier deliveries before official services activity data are fully available. Since services make up a large share of the U.S. economy, this is an important early signal of overall economic momentum.
Note on nuance: Within the index, New Orders is the most forward-looking component, while Business Activity is closer to current conditions. The headline index blends both, making it leading overall but with a mild coincident element from Business Activity.
Why It Matters#
Because services dominate the U.S. economy, ISM Services PMI often has more direct relevance to GDP and overall employment than the manufacturing PMI. A sustained drop below 50 in services, especially in New Orders, is a significant warning signal for the broader economy and can directly affect Fed policy thinking.
ISM vs S&P Global#
| Feature | ISM Services | S&P Global Services |
|---|---|---|
| Panel size | ~400+ companies | ~400 companies |
| Headline construction | 4-component composite (Business Activity, New Orders, Employment, Supplier Deliveries) | Single question — business activity vs. prior month only |
| Flash release | No — one final release | Yes — Flash mid-month, Final next month |
| Comparability | Not directly comparable to S&P Global Services | Not directly comparable to S&P Global Manufacturing |
See PMI Diffusion Index Explained for the full ISM vs S&P Global breakdown.
Related Notes#
- ISM Manufacturing PMI — manufacturing sector counterpart from the same provider
- S&P Global Services PMI — alternative services gauge; Flash release; headline is a single activity question
- PMI Diffusion Index Explained — diffusion index formula and ISM vs S&P Global comparison