US services PMI rose to 54.4% in December, ISM says
ISM said its services gauge hit its highest reading of 2025 as new orders strengthened and employment returned to expansion.
By Sofia Marchetti · Columnist
· 3 min read
The U.S. services sector ended 2025 with stronger momentum, according to the Institute for Supply Management. Its Services PMI rose to 54.4% in December from 52.6% in November, a reading that signals expansion and gives investors a cleaner read on demand outside the goods-producing side of the economy.
A PMI, or purchasing managers’ index, is a survey-based gauge of business conditions. Readings above 50 indicate expansion, while readings below 50 indicate contraction, according to ISM.
ISM said December marked the services index’s 10th month in expansion territory and its highest reading of the year. Steve Miller, chair of ISM’s Services Business Survey Committee, said the 54.4% reading was 1.8 percentage points above November and represented a third straight month of expansion.
Demand improved in December
The headline gain was supported by stronger business activity and new orders, two parts of the report that help show whether companies are seeing current demand and fresh work coming in.
ISM reported that the Business Activity Index climbed to 56% in December from 54.5% in November, a 1.5 percentage-point increase. The New Orders Index rose more sharply, reaching 57.9% from 52.9% a month earlier.
For retail investors, new orders can be one of the more useful pieces of the report because it points to demand that has been placed but may not yet have fully shown up in output. ISM’s December reading shows that new orders remained above the 50 expansion line and accelerated from November.
Hiring moved back into expansion
The labor component also improved. ISM said the Employment Index rose to 52% in December from 48.9% in November, moving above 50 for the first time in seven months.
That shift followed six straight months of contraction in the employment measure. ISM also said December was the fifth monthly increase in a row for the index, after a July reading of 46.4%.
The move matters because hiring is one way services companies respond when demand improves. A reading above 50 does not show how many jobs were added, but it indicates that more survey respondents reported expansion in employment than contraction.
Prices stayed elevated, but eased slightly
Costs remained a pressure point. ISM said its Prices Index registered 64.3% in December, down from 65.4% in November. The December level was the lowest since March 2025, when the index stood at 60.9%.
Even with the monthly decline, ISM said the Prices Index has been above 60% for 13 straight months. For investors watching margins, that means service providers continued to report broad price pressure, though December showed a modest easing from the prior month.
Supplier deliveries also remained in expansion territory, but slowed less than in November. ISM reported the Supplier Deliveries Index at 51.8%, down from 54.1% in November. ISM said this index is inverted compared with the other PMI components, meaning a reading above 50 indicates slower supplier deliveries.
According to ISM, December was the 13th consecutive month that supplier deliveries were in expansion territory. The institute said slower deliveries are typical when the economy improves and customer demand rises.
This story draws on original reporting from Calculated Risk.
