Services Sector Returns to Expansion in October, ISM Says; S&P Data Indicate Growth Acceleration

12:52 PM EST, 11/05/2025 (MT Newswires) -- The US services sector returned to expansion in October, the Institute for Supply Management said Wednesday, while a survey by S&P Global (SPGI) indicated faster growth sequentially amid demand strength.

The ISM's purchasing managers' index rose to 52.4 last month from 50 in September. The consensus was for a 50.8 print in a survey compiled by Bloomberg. A reading above 50 indicates the services sector economy is generally expanding.

The new orders index grew to 56.2 from 50.4, marking its highest reading since October 2024, while the gauge for business activity increased to 54.3 from 49.9. The employment index rose to 48.2 from 47.2, but saw a fifth straight contraction. The prices index increased to 70 from 69.4, according to the ISM survey.

"The US services sector expanded and price pressures rose, though a softer labor market will likely pave the way for another (Federal Reserve) rate cut in December," BMO Capital Markets said in a report.

Employment in the US private sector increased more than expected in October following two consecutive months of weak hiring, data from Automatic Data Processing (ADP) showed Wednesday. Last week, the Fed lowered its benchmark lending rate by 25 basis points and reiterated concerns regarding the labor market.

Separately, S&P Global (SPGI) said Wednesday its services PMI gauge ticked up to 54.8 in October from 54.2 the previous month, staying in the expansion territory for 33 consecutive months amid a "solid" increase in new business volumes. Growth in hiring was "modest," while confidence regarding the future reached a six-month low last month, the data provider said.

"October's final PMI data add to signs that the US economy has entered the fourth quarter with strong momentum," S&P Global Market Intelligence Chief Business Economist Chris Williamson said. "Growth in the vast services economy has picked up speed to accompany an improved performance in the manufacturing sector."

Earlier this week, ISM data showed that the US manufacturing sector saw an eighth straight monthly contraction in October, while an S&P Global (SPGI) report indicated growth for a third consecutive month.

"However, there are signs that new business is coming at the cost of service providers having to soak up continued high input price growth to remain competitive," Williamson said Wednesday. "While good news in terms of inflation, this lack of pricing power hints at weak underlying demand and lower profits."

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