The ISM Services PMI for March 2026 registered 54%, a decrease of 2.1 percentage points from February's reading of 56.1%. While the index indicates the 21st consecutive month of expansion for the services sector, it fell short of market expectations (forecasted at 54.8%–55.0%).
Service Sector Performance (March 2026)
- Business Activity Index: 53.9% (Down 6.0 points). This is the lowest reading for business activity since September 2025.
- Prices Index: 70.7% (Up 7.7 points). This massive surge—the largest one-month increase in over 13 years—reflects soaring costs for fuel and petroleum-based products due to the Middle East conflict.
- New Orders: 60.6% (Up 2.0 points). Demand remains robust, driven by digital transformation and AI infrastructure needs.
- Employment: 45.2% (Down 6.6 points). The index returned to contraction territory as firms prioritize operational streamlining and "cost-cutting mode" amid rising input costs.
- Supplier Deliveries: 56.2% (Up 2.3 points). Slower deliveries were attributed to transportation disruptions in the Middle East and a domestic shortage of trucks.
Summary Table: Services vs. Manufacturing
Industry Highlights
- Growing Industries: 13 industries reported growth, led by Wholesale Trade, Finance & Insurance, and Accommodation & Food Services.
- Impact of War: Panelists in the Wholesale Trade and Construction sectors specifically cited the U.S.-Israel military operations and threats to the Strait of Hormuz as factors increasing regional logistics costs and war-risk surcharges.
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