ISM Services PMI (NMI)
The ISM Services PMI is a monthly diffusion index measuring the breadth of expansion or contraction across US services firms, the cleanest single read on the dominant services sector of the US economy.
The macro regime is unambiguously STAGFLATION DEEPENING. The hot CPI print (pending event, 24h ago) is not a surprise — it is a CONFIRMATION of the pipeline signals that have been building for weeks: PPI accelerating faster than CPI, Cleveland nowcast at 5.28%, breakevens rising +10bp 1M across the …
What Is the ISM Services PMI?
The ISM Services PMI, also called the Non-Manufacturing Index (NMI), is a monthly diffusion index produced by the Institute for Supply Management based on a survey of approximately 300 US services firms across 18 industries. It mirrors the methodology of the Manufacturing PMI: a 50-line expansion/contraction threshold with sub-indices for new orders, business activity, employment, and supplier deliveries.
The Services PMI captures the dominant sector of the US economy — services account for roughly 70% of GDP — making it the cleanest single read on the bigger half of the economy.
Why It Matters for Markets
The ISM Services PMI is the primary forward indicator for the services sector. Sustained readings below 48 have historically been associated with broader business-cycle weakness; sustained readings above 55 signal strong expansion. The release moves equity markets and bond yields on surprises, with the 10-year Treasury typically moving 3-8 basis points on the release.
The Services PMI has been particularly important in the 2022-2025 cycle because of the persistent manufacturing/services divergence. When manufacturing was contracting in 2023-2024, the services PMI's continued expansion signal was the key evidence that the broader economy was not in recession despite weak manufacturing data.
How to Read the Print
Headline NMI vs 50 line. Above 50 is expansion. Sustained readings 2-3 points above 50 are healthy expansion; readings 5+ points above are strong; readings below 50 signal contraction.
Business activity sub-index. The services analog to manufacturing production. Strong business activity signals robust services output.
New orders sub-index. The most forward-looking component for the services sector, leading the headline by 1-2 months.
Prices paid sub-index. The services-sector inflation signal. Important because services inflation (especially super-core CPI) has been the stickiest part of the post-2020 inflation cycle.
Historical Context
The ISM Services PMI data series begins in 1997. The 2010-2019 average was approximately 55.5. The pandemic shock pushed NMI to 41.8 in April 2020, the lowest in the data series. The 2021 recovery brought it to 68.4 in November 2021, the highest in the data series.
Through 2024-2025, NMI has run in the 52-56 range — solidly in expansion but well below the 2021 peak. The divergence with manufacturing PMI (47-50) has been a defining feature of the cycle. The Services PMI staying above 50 has been the Fed's primary evidence that the broader economy is in normalisation rather than contraction.
Frequently Asked Questions
▶How is the ISM Services PMI different from the Manufacturing PMI?
▶When is the ISM Services PMI released?
▶Why has the ISM Services PMI diverged from manufacturing?
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