ISM Services PMI Dips to 54.9 Fueling Gold Price Decline

The U.S. service sector showed signs of slowing in September, according to the latest report from the Institute for Supply Management (ISM). The ISM Services Purchasing Managers Index (PMI) dropped to 54.9 from 55.4 in August, missing economists' expectations of 55. A reading above 50 indicates economic growth, while values below 50 suggest contraction.

Spot gold prices fell to $4,141.73 per ounce, reflecting a minor daily gain of 0.03%. The decline in the ISM Services PMI was driven by a 5.2-percentage-point drop in the Business Activity Index to 56.5%, down from 61.7% in August. The New Orders Index also fell slightly to 59.8%, while the Employment Index returned to expansion territory for the first time in three months, rising to 50.1%.

Steve Miller, Chair of the ISM Services Business Survey Committee, noted that the Supplier Deliveries Index increased to 53.2%, marking the 22nd consecutive month of expansion. The Prices Index reached 74%, the highest since July 2022, driven by tariffs and rising fuel costs. Thirteen industries reported growth in September, one more than in August, while four indicated contraction.

Miller highlighted that fuel costs and supply chain constraints were major concerns, impacting lead times and expenses. The Backlog of Orders index hit its highest level since July 2022, suggesting increased backlogs and business activity. Despite the slowdown, the September Services PMI remained above the 12-month average of 54.1%.