Economic activity in the U.S. services sector expanded for a ninth consecutive month in November, though signs of caution emerged as new orders slowed, employment remained weak and supply chain disruptions intensified, according to data released by the Institute for Supply Management.
The ISM services PMI rose to 52.6% in November from 52.4% in October, remaining above the 50 threshold that separates growth from contraction. While the reading exceeded its 12-month average of 51.7%, that average is at its lowest level since August 2024 and near the weakest levels recorded since the aftermath of the Great Recession.
Business activity remained steady, with the business activity index increasing slightly to 54.5%. New orders, however, lost momentum, slipping 3.3 percentage points to 52.9%, an indication that demand is expanding more slowly as the year draws to a close.
“Continued expansion in both the business activity and new orders indexes in November are positive signs of an emerging recovery for the services sector,” said Steve Miller, chair of ISM’s services business survey committee, though he cautioned that underlying conditions remain uneven.
Hiring remained a key drag. The employment Index registered 48.9%, marking a sixth consecutive month of contraction despite a modest improvement from October. While the reading was the strongest since May, it underscored continued hesitancy among service-sector employers amid cost pressures and economic uncertainty.
Supply chains showed renewed strain. The supplier deliveries Index climbed to 54.1% from 50.8%, signaling slower deliveries. ISM attributed the slowdown to a mix of air traffic disruptions tied to the federal government shutdown, customs delays related to changing tariffs, and broader logistics challenges ahead of the holiday season.
Inflation pressures moderated but remained elevated. The prices Index fell sharply to 65.4% from 70% in October, its lowest level since April. Even so, prices have risen for 102 consecutive months, with respondents citing higher costs for labor, steel, copper products, electronic components, and software licensing.
Inventory levels rebounded, with the Inventories Index returning to expansion at 53.4% after two months of contraction. At the same time, inventory sentiment continued to signal imbalance, as respondents reported inventories as “too high” for the 31st straight month.
Demand indicators offered mixed signals. The backlog of orders index remained in contraction at 49.1% but posted its largest single-month increase since mid-2022, suggesting that order pipelines may be stabilizing after a prolonged slowdown.
Twelve of the 18 services industries tracked by ISM reported growth in November, led by retail trade, accommodation and food services, wholesale trade, health care, and finance and insurance. Construction, real estate, transportation and warehousing, and mining remained in contraction.
Tariffs and policy uncertainty were recurring themes in respondent comments. Several cited inconsistent supplier pricing, sourcing challenges, and reduced visibility into demand, while others pointed to the government shutdown as a contributor to delayed projects and slower border processing.
ISM said the November Services PMI reading corresponds to an estimated 1.3% annualized increase in real gross domestic product, extending the overall economic expansion to 66 consecutive months.
Despite the continued expansion, ISM noted that the services sector remains far less robust than earlier in the recovery cycle. The 12-month average PMI has declined by more than 10 percentage points since early 2022, highlighting the cumulative impact of inflation, tariffs, and labor constraints on the nation’s largest economic sector.
The December ISM Services PMI report will be released Jan. 7.
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