US ISM services gauge at 54.5 in October, below 54.8 estimate

• The prior headline figure was 54.9.
• For prices paid, the earlier reading was 74.0.
• New orders had stood at 59.8 previously.
• Employment was 50.1 in the prior report.
• Business activity was previously at 56.5.

By way of context, the Services PMI from the Institute for Supply Management ranks among the most closely followed monthly indicators of US economic conditions. The data are released at 10 am ET on the third business day of the month, two days after the manufacturing counterpart, and are based on a survey of purchasing and supply executives at services firms. Until 2020, the release was called the non-manufacturing index.

As with other PMIs, this one works as a diffusion index: a reading above 50 points to expansion and one below 50 points to contraction. The overall figure is built from four equally weighted components — business activity, new orders, employment and supplier deliveries. Since services account for most US economic output and jobs, the survey tends to be viewed as a truer gauge of the wider economy than the manufacturing ISM.

The prices index is often the portion of the release that moves markets the most. It tracks the proportion of companies paying more for inputs and is now viewed as an important leading indicator of services inflation, something the Federal Reserve monitors carefully. The employment component gives an advance look at hiring and is frequently examined in the run-up to the monthly employment report.

Additional sub-indexes cover inventories, order backlogs, new export orders, imports and inventory sentiment. The release also shows how many of the 18 services industries posted growth and carries anonymous comments from respondents on demand, costs, tariffs and policy, remarks that are frequently cited.

ISM readings tend to have more influence on markets than the S&P Global services PMI, thanks to a longer track record and a bigger audience. An unexpected result in the top-line number or the prices index can shift Treasury yields, the US dollar and stock prices, especially when the economy looks close to a turning point.