The U.S. services sector showed increased momentum in August as the ISM Services PMI climbed to 55.4%, exceeding the consensus estimate of 54.3%. This marks the 26th consecutive month of expansion for the sector. The headline improvement was fueled by a significant jump in the New Orders Index to 60.9% and a rise in the Business Activity Index to 61.7%, suggesting a "back-to-school boost" in demand despite broader economic headwinds.
However, the report also pointed to underlying pressures, as the Prices Index surged to 72.6%, reflecting a persistent rise in input costs. Meanwhile, the Employment Index remained in contraction at 47.8% for the second month in a row. Survey respondents noted that while demand remains resilient, managing headwinds from tariffs and geopolitical conflicts continues to impact overall supply chain costs.