The US services sector came in hotter than expected in August, with the ISM Non-Manufacturing PMI landing at 55.4, well above the consensus estimate of 54.1 and the July reading of 54.1. Any number above 50 signals expansion, so 55.4 is not just growth. It is growth with conviction.
The report, released September 3, marks the 92nd consecutive month of expansion for the non-manufacturing sector. That is more than seven and a half years of uninterrupted growth.
What the numbers actually say
Business activity and production rose to 57.5, a gain of 1.6 points from July. New orders climbed to 57.1, up 2.0 points. Employment expanded to 56.2, a 2.6-point jump.
Of the 18 industries the ISM tracks, 15 reported expansion in August. Only 2 reported contraction.
Retail Trade, Information, and Finance and Insurance led the expansion.
The August reading sits just 0.9 points below the 12-month average of 56.2, meaning this month was not an anomaly spiking above trend. It was a return toward the mean after July came in slightly softer.
Federal Reserve implications and market context
The employment sub-index jumping 2.6 points to 56.2 suggests services businesses are not just retaining staff. They are competing for workers, which historically feeds into wage growth.
July’s reading of 54.1 had already marked the 25th consecutive month with the index above the neutral 50 threshold. August extended that run while also accelerating the pace.
The new orders sub-index at 57.1 is a leading indicator within the report. Orders placed today become revenue recognized later, which means businesses reporting strong inflows in August are signaling confidence in demand through at least the fourth quarter.
Cost pressures are flagged in the report as an ongoing concern. The ISM report notes strategic hiring challenges alongside the headline expansion, pointing to a labor market that is tight enough in key service categories to keep costs elevated.