The US service sector is recovering but employment remains a concern, with the price index hitting a three-year high.

In October, service sector activity in the United States returned to expansion. Data released by the Institute for Supply Management (ISM) on Wednesday showed that the service sector PMI reached 52.4% in October, higher than September's 50%, and has been above the expansion line for the eighth consecutive month, indicating a slight recovery in service sector economic activity. ISM Service Business Survey Committee Chairman Steve Miller stated that this month's data indicates that the economy is still experiencing modest expansion, although the trend remains lower than the average level of the past few years. The business activity index in October rose to 54.3%, a significant increase of 4.4 percentage points from September's 49.9%, returning to the expansion zone. The new orders index rose to 56.2%, a jump of 5.8 percentage points from the previous month, reaching the highest level since October 2024, reflecting an improvement in demand for services. However, the employment index has been in contraction for the fifth consecutive month, recording 48.2% this month, showing a weak willingness of businesses to hire despite some improvement from September. The supplier deliveries index was 50.8%, remaining in the "expansion" zone for the eleventh consecutive month, indicating a continued slowdown in delivery speed. Since this index is a "reverse indicator," a reading above 50% usually indicates slower supplier deliveries, which may be related to improved demand or supply chain constraints. Meanwhile, the price index rose to 70%, reaching or exceeding this level for the first time since October 2022, and has been above 60% for the eleventh consecutive month, indicating that inflation pressures still exist in the service sector, especially due to tariffs pushing up material and service costs. The inventory index recorded 49.5%, showing some improvement from the previous month but still in a contraction state, as businesses generally reduce inventory levels in response to uncertainty in demand and costs. The backlogs of orders index plunged to 40.8%, the second lowest level since 2009, indicating that businesses can still manage existing orders under current employment and capacity conditions without significant pressure to deliver on time. Feedback from the industry shows growth in 11 sectors in October, including accommodation and food services, retail, wholesale, real estate, healthcare, transportation and warehousing, while 6 sectors experienced contraction, including arts, entertainment, management services, finance and insurance, public administration, and construction. Many companies mentioned that tariffs and supply chain factors are still increasing costs, and the government shutdown was repeatedly mentioned, with some industries concerned that a prolonged shutdown could lead to layoffs and budget delays. In terms of specific indicators, many sectors reported seasonal improvements in demand, such as the healthcare and retail sectors. However, some companies indicated that economic signals are "clearly contradictory" and it is difficult to judge future trends. Some manufacturing and equipment companies are still affected by import restrictions and price increases, while the real estate industry continues to face high interest rates suppressing demand.