U.S. Services Sector Expansion Accelerates in August 2026 Amid Rising Prices and Supply Chain Pressures
Event summary
- The ISM Services PMI® rose to 55.4 in August 2026, up 1.3 points from July, marking 26 consecutive months of expansion.
- Business Activity and New Orders indexes hit multiyear highs at 61.7% and 60.9% respectively, signaling strong demand.
- Employment Index contracted for a second month at 47.8%, with 17.1% of companies reducing staff levels.
- Prices Index surged to 72.6%, the highest since August 2022, driven by fuel, steel, and GPU shortages.
- Supplier Deliveries slowed for the 21st consecutive month, reflecting ongoing supply chain disruptions.
The big picture
The U.S. services sector continues its expansion streak, with August 2026 data showing robust business activity and new orders despite persistent employment challenges. Rising prices for key commodities and supply chain disruptions remain significant headwinds, exacerbated by geopolitical tensions and tariff uncertainties. The sector's ability to maintain growth momentum will depend on resolving labor shortages and navigating volatile input costs.
What we're watching
- Labor Market Dynamics
- Whether the services sector can sustain employment growth amid persistent hiring challenges and industry-specific staffing shortages.
- Inflationary Pressures
- How long elevated commodity prices and supply chain bottlenecks will persist, particularly for fuel, steel, and technology components.
- Geopolitical Risks
- The impact of ongoing Middle East conflicts and tariff policies on supply chain stability and input costs across multiple industries.