The US services sector stagnated in September, with the ISM Services PMI dropping to 50.0 from 52.0 in August, below market expectations of 51.7. The reading reflects a sharp slowdown in business activity, leaving the index at its weakest level since July.
Details of the report
The Employment Index edged higher to 47.2 from 46.5 but stayed in contraction for a fourth straight month, underscoring persistent weakness in the labor market. The Prices Paid Index rose slightly to 69.4 from 69.2, signaling that inflationary pressures remain elevated.
“September’s Services PMI level returned to numbers very similar to May and July, with weakness in business activity and continued weakness in employment,” said Steve Miller, Chair of the ISM Services Business Survey Committee. He added that employment remains under pressure due to delayed hiring and difficulty finding qualified staff.
Market reaction
The US Dollar came under renewed pressure following the release. The US Dollar Index (DXY) slipped 0.2% to 97.67, extending losses from earlier in the week as markets recalibrated Fed policy expectations.
EUR/USD is holding above the 1.0700 handle, though upside remains limited as investors weigh the implications of slowing US services activity against lackluster Eurozone data.
Broader context
This month’s ISM release carries added significance as the US government shutdown has delayed official labor market statistics, including the September Nonfarm Payrolls report. Market participants are therefore placing greater weight on private-sector surveys like ISM and ADP to gauge the economy’s trajectory.
Earlier in the week, ISM Manufacturing PMI showed an improvement to 49.1 from 48.7, but the index remains in contraction. Together, the latest figures highlight softening momentum across the US economy, reinforcing market bets that the Federal Reserve will consider additional easing in upcoming meetings.
