Summary of ISM Services Index Report - March 2026

The ISM Services Index for February 2026 has shown a significant expansion in the US service sector, reaching a reading of 56.1. This figure not only exceeds the median expectations of 53.5 from a Bloomberg survey but also marks the highest level of activity since mid-2022. The previous month's reading was 53.8, indicating a robust growth trajectory.

Key Highlights

• New Orders: The new orders index surged to 58.6, reflecting strong demand.
• Business Activity: This index recorded a value of 51.8, indicating continued expansion.
• Employment: The employment index also stood at 51.8, suggesting stable job growth in the sector.
• Prices Paid: The prices paid index decreased to 63, signaling a cooling of inflationary pressures within the services sector.

Sector Performance

The report indicates a broad strengthening across the service sector, with fourteen out of eighteen industries reporting growth. Notable sectors leading this growth include mining, information, and real estate. The labor market appears to be robust, with separate ADP data showing that US companies added 63,000 jobs in February, the highest monthly gain since July.

Inflation Dynamics

Interestingly, there is a divergence between the manufacturing and services sectors regarding inflation. While the ISM manufacturing survey indicated a sharp increase in input prices, the services sector has experienced a decrease in inflationary pressures, with the prices paid index falling to a nearly one-year low. This is particularly noteworthy given the unprecedented 11.9-point jump in order backlogs, which have reached a four-year high.

Business Sentiment

Despite the positive data, business sentiment remains cautious. Industry comments suggest that while the current economic climate is solid, there are "significant unknown risks" stemming from potential tariff actions by the US government. The mining and agriculture sectors have reported that tariff volatility and changing trade agreements are already impacting purchasing operations and import costs.

Market Reaction

Following the release of this data, the US500 index attempted to recover from previous declines, buoyed by the positive economic indicators and hopes for stabilization in the Middle East.