What it means
ISM Services PMI (formerly Non-Manufacturing PMI) measures the services sector — by far the larger share of US economic activity. Same methodology as Manufacturing PMI: survey of purchasing managers, composite index, sub-indexes. Released the third business day of each month. Given services dominance, ISM Services has gained importance over Manufacturing PMI in recent years; some economists argue it's the more important leading indicator now.
Why it matters
Services dominate US GDP, employment, and inflation dynamics. A services PMI showing strong New Orders and rising Prices is a hawkish signal for the Fed even when manufacturing is weak. The relative strength of services vs manufacturing tells you about the composition of the cycle.
How to use it
Track composite Services PMI alongside Manufacturing PMI. Note divergences: services strong + manufacturing weak = services-led cycle (typical late-2023 to mid-2024). Watch Services Prices Paid as a forward indicator for services inflation, which has been sticky in the post-COVID cycle.
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