ISM Non-Manufacturing PMI Analysis: Services Sector Returns to Expansion at 52.4%

This analysis is based on CNBC’s Rick Santelli report [1] published on November 5, 2025, covering the October 2025 ISM Non-Manufacturing PMI data.

The October 2025 ISM Non-Manufacturing PMI reading of

represents a significant beat versus the consensus estimate of and marks the services sector’s return to expansion territory [1]. This 2.4 percentage point increase from September’s 50.0% reading contributed to a on November 5, 2025, with major equity indices posting gains: S&P 500 (+0.51%), NASDAQ (+0.76%), Dow Jones (+0.09%), and Russell 2000 (+0.76%) [0].

The services expansion was reflected in sector performance, with Energy (+3.21%) leading gains, followed by Industrials (+1.33%), Technology (+0.81%), Healthcare (+0.57%), and Financial Services (+0.56%) [0]. However, the mixed consumer sector performance—Consumer Cyclical (-1.09%) and Consumer Defensive (-0.99%)—suggests selective spending patterns despite overall services expansion [0].

: While the headline PMI shows expansion, underlying components reveal concerning structural issues. The jumped 4.4 points to 54.3% and surged 5.8 points to 56.2% (highest since October 2024) [1]. However, this expansion masks significant labor market weakness with the at 48.2%, marking the 5th consecutive month of contraction [1].

: The reached 70%, its highest level since October 2022, indicating significant input cost pressures that could translate to consumer price inflation [1]. This creates a complex policy environment for the Federal Reserve, which must balance economic expansion against persistent inflation.

: Respondents specifically cited the as negatively impacting business activity and creating uncertainty about future layoffs [1]. This appears to be contributing to employment weakness despite overall sector expansion, suggesting the headline PMI may be temporarily depressed by political factors.

1. Employment Weakness
   : Five consecutive months of declining services employment despite overall expansion suggests structural labor market challenges [1]. This could impact consumer spending and economic growth sustainability.

2. Inflationary Pressures
   : The 70% Prices Index indicates significant input cost pressures that could translate to broader consumer price inflation, potentially complicating Fed policy decisions [1].

3. Backlog Decline
   : The Backlog of Orders Index at 40.8% represents the 8th straight month of contraction near 16-year lows, suggesting future revenue growth may be constrained [1].

4. Government Shutdown Uncertainty
   : The ongoing shutdown creates significant uncertainty for federal contractors and related service providers, potentially suppressing both employment and business activity [1].

The services sector expansion, particularly the strong New Orders Index at 56.2%, indicates robust demand that could translate to revenue growth once temporary headwinds resolve [1]. The 52.4% PMI reading corresponds to approximately 1.2% annualized GDP growth according to ISM’s historical model, suggesting moderate but sustainable economic expansion [1].

The October 2025 ISM Services PMI at 52.4% represents a positive development for the U.S. economy, signaling a return to expansion in the dominant services sector. However, the underlying data reveals concerning trends in employment and persistent inflationary pressures that could complicate the economic outlook. The federal government shutdown adds another layer of uncertainty that may be temporarily suppressing both employment and business activity.

include weekly jobless claims, November employment data, government shutdown negotiations, and Fed statements regarding services sector inflation. The divergence between expanding services activity and contracting employment may indicate productivity gains but also suggests potential labor market weakness that could impact consumer spending going forward [1].