(Kitco News) – The U.S. service sector strengthened last month with business activity improving, but price pressures continued to tick higher and employment remained in contraction, according to the latest data from the Institute for Supply Management (ISM).
The ISM announced on Wednesday morning that its Services Purchasing Managers Index rose to 52.4 in October, up from September’s reading of 50. The data was better than expected, as economists were looking for a reading of 50.8.
Readings above 50 in such diffusion indexes signify economic growth and vice versa. The farther an indicator is above or below 50, the greater or smaller the rate of change. In September, the Services PMI reading of 50 percent was at the breakeven point between expansion and contraction for the first time since January 2010.
“The Business Activity Index also returned to expansion territory in October, registering 54.3 percent, 4.4 percentage points higher than the reading of 49.9 percent recorded in September,” said Steve Miller, chair of the Institute for Supply Management Services Business Survey Committee. “The New Orders Index remained in expansion in October, with a reading of 56.2 percent, up 5.8 percent from September’s figure of 50.4 percent and its highest reading since October 2024 (56.7 percent). The Employment Index contracted for the fifth month in a row with a reading of 48.2 percent, a 1-percentage point improvement from the 47.2 percent recorded in September.”
Gold prices trended sideways following the 10 am EDT release. Spot gold last traded at $3,973.67 per ounce for a gain of 1.06% on the daily chart.
“The Supplier Deliveries Index registered 50.8 percent, 1.8 percentage points lower than the 52.6 percent recorded in September and 0.7 percentage point below its 12-month average of 51.5 percent. This is the 11th consecutive month that the index has been in expansion territory, indicating slower supplier delivery performance.”
“The Prices Index registered 70 percent in October, its first time at or above that threshold since a reading of 70.7 percent in October 2022,” Miller said. “The index has exceeded 60 percent for 11 straight months.”
The Inventories Index also rose 1.7 percentage points to 49.5 percent in October, but remained in contraction for the second straight month after three months in expansion territory. “The Inventory Sentiment Index expanded for the 30th consecutive month, registering 55.5 percent, down 0.2 percentage point from September’s figure of 55.7 percent,” Miller noted. “The Backlog of Orders Index was in contraction territory for the eighth month in a row, registering 40.8 percent in October, a 6.5-percentage point drop from the September figure of 47.3 percent; this is the index’s second-lowest reading since May 2009 (40 percent).”
“Eleven industries reported growth in October, one more than in September, while the number reporting contraction decreased from seven to six,” he added. “The October reading of 52.4 percent is 0.7 percentage point above the 12-month average of 51.7 percent. However, the 12-month average is at its lowest level since August 2024 (51.7 percent) and the second lowest since June 2010 (51.4 percent).”
“October’s Services PMI is a continuation of a downward trend of more than 10 percentage points in the 12-month average since February 2022, when it was 62.6 percent,” Miller said. “The rebounds in both the Business Activity and New Orders indexes in October are positive signs, while the continued contraction in the Employment index shows a lack of confidence in the continued strength of the economy.”
