ISM also shows rising prices for 100 months.
Please consider the September 2025 Services ISM® Report On Business® emphasis mine.
The report was issued today by Steve Miller, CPSM, CSCP, Chair of the Institute for Supply Management® (ISM®) Services Business Survey Committee: “In September, the Services PMI® registered an unchanged reading of 50 percent, 2 percentage points lower than the August figure of 52 percent. The Business Activity Index moved into contraction territory in September, registering 49.9 percent, 5.1 percentage points lower than the reading of 55 percent recorded in August. This is the first time the index has entered contraction territory since May 2020.
“The Prices Index registered 69.4 percent in September, a 0.2-percentage point increase from August’s reading of 69.2 percent. The index has exceeded 60 percent for 10 straight months, its longest such streak since 30 consecutive readings above 60 percent from October 2020 to March 2023.
Miller continues, “September’s Services PMI® level returned to numbers very similar to May and July, with weakness in business activity and continued weakness in employment. The recovery in the Backlog of Orders Index to a reading indicating slower contraction was a positive signal, as was continued expansion in the New Orders index. Commentary in general indicated moderate or weak growth, with more isolated observations of supplier delivery challenges. Employment continues to be in contraction territory, thanks to a combination of delayed hiring efforts and difficulty finding qualified staff.”
A Services PMI® above 48.6 percent, over time, generally indicates an expansion of the overall economy. Therefore, the September Services PMI® indicates the overall economy is expanding for the 64th straight month. Miller says, “The past relationship between the Services PMI® and the overall economy indicates that the Services PMI® for September (50 percent) corresponds to a 0.4-percentage point increase in real gross domestic product (GDP) on an annualized basis.”
Prices
Prices paid by services organizations for materials and services increased in September for the 100th consecutive month. The Prices Index registered 69.4 percent, 0.2 percentage point higher than the 69.2 percent recorded in August. The September reading is the index’s second-highest since October 2022 (70.7 percent) and its 10th straight month above 60 percent but the 35th in a row below 70 percent.
Fifteen of the 18 services industries reported an increase in prices paid during the month of September, in the following order: Accommodation & Food Services; Management of Companies & Support Services; Public Administration; Information; Construction; Other Services; Health Care & Social Assistance; Professional, Scientific & Technical Services; Transportation & Warehousing; Real Estate, Rental & Leasing; Educational Services; Finance & Insurance; Agriculture, Forestry, Fishing & Hunting; Utilities; and Wholesale Trade. No industry reported a decrease in prices paid in September.
What Respondents Are Saying
- “We are beginning to see the impact of the tariffs impact our business, particularly for food products from India, China, and Southeast Asia, coffee from South America, and apparel and electronics from Asia. Our year-over-year cost increases are getting progressively greater.” [Accommodation & Food Services]
- “New residential construction continues to struggle in a tough market. Housing values remain high, and tariffs are beginning to be passed through on materials that are metal based. The pace of housing starts has been stagnant to slightly declining, as we head out of the summer building season.” [Construction]
- “Pharmacy costs continue to rise, and medical devices are being held at bay mainly due to contracts and continued negotiations where we have two to three sources for a given product.” [Health Care & Social Assistance]
- “Demand for artificial intelligence (AI) and cloud infrastructure remains very strong. Our primary focus this month was on increasing production throughput to begin clearing the significant order backlog built up over the summer. While new order intake has stabilized at a high level, the overall business outlook remains positive. We are still facing significant supply chain challenges, especially for advanced semiconductors and power components, with lead times remaining extended. Price pressures are still present but have not worsened compared to the previous month.” [Information]
- “Client demand in professional services remains steady, though decision-making timelines are lengthening due to continued economic uncertainty and interest-rate concerns. We are also seeing modest upward pressure on labor costs, which impacts both our internal resourcing and supplier pricing.” [Professional, Scientific & Technical Services]
- “Growing apprehension regarding state efforts to reduce or eliminate property taxes that are a major revenue source for local governments. And continuing concern about future economic conditions, inflation, tariffs and their impact on increased prices.” [Public Administration]
- “The overall housing market remains stagnant, which has forced our company to be hyper-vigilant about costs. However, we are growing and increasing our market share despite the headwinds. Tariffs continue to inject an unnecessary level of uncertainty across the broader economy, and costs are now beginning to increase with the full effect of the tariffs now coming into play.” [Real Estate, Rental & Leasing]
- “Costs overall have stabilized, and we’ve not seen any interruptions in sourcing or shipments.” [Retail Trade]
- “We’ve had more tariff charges last month than in previous months.” [Utilities]
- “Business conditions continue to soften, even in markets that have historically been more resilient. Demand is simply weak.” [Wholesale Trade]
Diffusion Indexes
ISM is a diffusion index with numbers above 50 indicating expansion and below 50 contraction.
A weakness of diffusion indexes is direction matters more than amount. For example, a business hiring 2 people would offset a business firing 300.
Mish Thoughts
Prices are soaring as backlog of orders collapse, imports collapse, export orders contract, employment dives, and business activity is in contraction for the first time since May of 2020.
This smacks of stagflation.
But all we have to do is ask Trump if prices are up 100 straight months are a problem.
He will suggest that ISM is in cahoots with ADP and the BLS to make him look bad.
Related Posts
October 1, 2025: ADP Private Jobs Decline by 32,000 in September, Huge Negative Revisions
ADP revised August from +54,000 to -3,000 making 2 straight months of declines.
September 5, 2025: Jobs Report Misery: Only 22,000 Gain in August, June Revised to -13,000
August was a bad month for job seekers. Here are the grim details.
September 5, 2025: Since January 2023, BLS Jobs Revisions Were Negative 24 Out of 31 Times
Witness negative revisions 77 percent of the time, with more coming.
The BLS jobs report for September was due today. It was delated due to the government shutdown.
So far the bond market is not too concerned over the stagflation outlook.
What? Me Worry? Gold seems to have another view.
Ahhhhh!
The Trump effect…
<<<
Bonds are just not a reliable indicator anymore. Perhaps most people in the industry today have never seen anything but a rallying market and were befuddled by the yield rise of the past few years, so they jump at them whenever rates go up thinking they will surely fall back.
In truth, even if we get to the Fed’s 2.5%, you could argue the 10 year at a 4% yield is a fair deal. But what if we don’t get there, and the terminal rate ends up being 3 or 3.5%? Then maybe today’s price would be a little too high. Now add on top of that Trumpian economic management and imported inflation, and well you know maybe it’s outright a bad deal to buy the 10yr with just a 4% yield.
I suppose bond bulls will counter that the 10yr at 4% is a fantastic bargain given the recession they’ve been expecting since the middle of 2020 (remember when the 30yr went to near 1% lol) is just around the corner. We shall see if that is indeed so
Am I the only one that sees a massive disconnect between the aspirations of AI and its new class of power demands and the realities of our aging power grid? The 800 volt systems required by Nvidia are quite different than what we have now.
As a related but not identical example, Porsche recently fired its CEO and took an $8 billion dollar write down as the 800 volt car charging strategy they tried to implement was impractical and they are going back to ICE power plants in most of their cars.
Thusfar 95% of AI instillations have not been revenue positive.
These Nvidia chipsets are at present energy hogs and the technology simply has to come up with a better and more efficient chipset and architecture to avoid the insane energy and cooling requirements.
I recall back when big IBM racks were first coming out and the rooms that were built to house them. only five years later the rooms were no longer required as chips advanced so quickly and a simple Dell workstation could take their place. The stranded infrastructure was staggering!
My thought is that the AI bubble is real and when it implodes will become another “Imploded AI Company” category for Mish to write about.
The question is when?
– Porsche recently fired its CEO.
> CEO’s get fired, it’s a thing. When they underperform, or over promise and fail to deliver, and for many other reasons, they lose their jobs. You didn’t realize this has been occurring for decades upon decades now?
– The 800 volt car charging strategy they tried to implement was impractical and they are going back to ICE power plants.
> So they are doing what most others are doing. The EV craze is dead in America and for quite sometime now, and around the World where it’s simply not practical as of yet.
>> China is the World Leader, but they are also the place in the World where it does make the most sense. They also have pumped Billions upon Billions in this arena, as it is their future mode of transportation as well as other options it provides them. They were smart, for their Country it truly makes sense for many reasons.
The 100 straight months of price increases is THE unhappiness driver.
So wonder the 1999 stock market melt-up continues unabated. FOMO. Back up the truck as what could possibly go wrong at this point?
Its just inflation. All the money printed is ending up in the stock market or housing.
form ZH
shown in the chart below, in September the Revelio Labs data set showed the best monthly increase in jobs in 2025!
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IT IS just 60.000 !
so ppl of USA is 335 mil .
working force , people over 18 is about 275 million
and yet somehow +- 60.000 CONSIDERED BY SOMEONE IS METRICS worth to even waste time to publish, and I am not even talking about investing decisions!!
jesus! people are gullible!!
alx
What about silver? Massive cup and handle that points to 90’s should the pattern complete. Current g/s ratio at 80. Been high for a very long time and just starting to drop. Historically g/s is at 15. What if gold was to just hover here and the g/s dropped to around 33 which it did in 2011ish
BTW Mish please adjust your articles so when clicked they target _self and not _blank. Ask your webmaster about this adjustment. Very annoying to always have new windows opened when I read your articles
I have links open the way many people want including myself.
I hate having to press back to get to where I was. It’s easy to screw up.
Much easier to close a window you don’t want than to get back somewhere you no long see and perhaps erased.
Sure it’s your choice. I’ve built and managed many websites over the years. And have never set them up that way. I read a lot of sites and can’t think of another one that does this. I check your site frequently and don’t like constantly having to close additional windows. But your house your rules
A serious recession is underway …
With regard to the government shutdown which will, in a relatively minor way, contribute to the recession …
Dems state that they want to maintain affordable care credits for US citizens;
Magas state they want no federal funding for health care for immigrants, undocumented and perhaps even those with legal status…
How long would it take to clarify positions and negotiate a compromise? A 4/5 Oct Saturday Sunday afternoon? Announcements for health care premiums have already started.
If three to six weeks of impasse transpire; the voter blame split will likely be the same, but Maga 2026 tickets will be adversely affected by those affected poor and moderate working class Maga voters in red districts with a persistent voter blame split …
Going into a recession, Maga is already under the very leaky umbrella of extreme tax preferences for the rich and conversely about 200-300 billion in tariffs taxes annually for everyone else – less 20 billion for the soybean bail-out. …
The 2026 midterms could be a blood bath … Violations of the Hatch Act could be prosecuted as early as 2027 and a 3rd presidential impeachment.
Oreshnik solves this @ Mach 12.
it has been 4 years and Russia still cant free up Donetsk region.
Something is rotten in the State of Denmark (= russia)
no wonder Putin arrests each day couple generals.
alx
they just print another 1 trln
and-or do war w/ Venezuela. or bomb Iran .again
USA ! USA!! USA!!!
i guess war w./ china or Russia is too much so far.