US services growth cools in October as costs and delays bite

The headline numbers

ISM reported its services index at 54.5 for October, down 0.4 point from September. Readings above 50 signal expansion, so the sector kept growing even as the pace moderated to a three-month low.

The prices paid gauge for inputs fell from earlier peaks, yet at 73 it was still the second-strongest since mid-2022. That index was near a one-year trough in February, shortly before the Iran war drove fuel prices sharply higher.

Demand, costs, and delivery snags

Solid consumer outlays, a steady job market, and firm business investment have underpinned services demand this year. At the same time, companies are navigating higher costs and more frequent delivery holdups.

Tariffs and the conflict in the Middle East have disrupted supply chains. ISM's supplier delivery index jumped to the highest since April, while order backlogs climbed to the strongest level since 2022. New orders dipped to a four-month low but stayed comfortably in growth territory.

In shifting markets, small advantages from smarter tools can compound into big gains. We're hosting our first ever investor livestream on 11/17 to show you how to use ChatGPT and Claude to invest like a pro, hosted by Briefs Finance CEO Jaspreet Singh. Save your seat.

Who expanded and who did not

In October, 15 service industries recorded growth, notably in transportation and warehousing, as well as in information and entertainment. Construction and healthcare posted declines.

Hiring remains cautious as firms balance strong demand against rising expenses, but ISM's employment index rose to 51.4 - the highest since February. "Tariffs and fuel cost impacts continued to be the most-cited issues impacting respondents' supply chains, while many respondents indicated they are not yet seeing the full impact of these cost escalations or have not passed them through to customers," Steve Miller, chair of ISM's Services Business Survey Committee, said. "This indicates that more pricing pressure is on the way if oil and tariff cost impacts are not mitigated."

What it means for your portfolio

Growth is intact, but elevated input costs and slower deliveries are showing up in prices paid, supplier times, and backlogs. Translation for investors: margin pressure may linger for service-heavy names even as demand holds up.

Learning how to use new technology can give investors a clearer decision edge. On 11/17, our CEO Jaspreet Singh goes live for our first ever investor livestream on how to use ChatGPT and Claude to invest like a pro. Register to join him.