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…
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