MNI INTERVIEW: ISM Services PMI Will Surpass 55 This Summer

U.S. services activity is likely to strengthen further after a December pickup as robust consumer spending and lower interest rates contribute to solid demand, Institute for Supply Management chair Steve Miller told MNI Monday.  

"We should be confident that we're going to see continued growth," he said in an interview after the release of the latest figures.

The December ISM services survey rose to the best level since October 2024, with the composite improving to 54.4 from 52.6 in November and above expectations of 52.2. The ISM improvement was widespread across the business activity, new orders, and employment indexes. Growth in ISM services is a contrast to the outlook for manufacturing. (See: MNI INTERVIEW: Manufacturing To Continue To Soften - ISM Chief) 

"Consumer spending over the last three months has been pretty strong. There's the combination of the interest rate reductions and the trends that we've been on in terms of increased business activity," he said. "I would be shocked if we're not above 55 this summer. We've seen a trend line up for every sub index since May."

The new orders index surged 5.0ppts to 57.9, a 15-month high, while business activity increased 1.5ppts to 56.0, the highest level in 2025. The employment index moved up to 52.0 from 48.9 in November, the first time in expansion territory since May. 

Miller suggested December's unexpected acceleration was in part due to seasonal factors but he does expect faster growth will continue into the new year. The prices index fell 1.1ppts to 64.3 in December, its lowest level since March. 

MUTED TARIFF EFFECT 

President Donald Trump's historic tariff policy changes in 2025 ended up having less impact than would have been thought, Miller said. "For services, we didn't see a huge impact, and we've seen in the four core sub-indexes gradual improvements since May. You would think if tariffs had a huge impact we would see those numbers coming down over that timeframe."

Miller's main caveat to the 2026 outlook is how a weaker dollar could cause a drag on consumer purchases. 

The ISM services PMI annual growth rate at 51.7 was the slowest on record, outside of 2008 and 2009. In 2024 the annual rate was 52.7.