What is the ISM Services PMI?
The ISM Services PMI (formerly the Non-Manufacturing PMI) comes from a monthly survey of purchasing and supply executives at U.S. services companies — from retail and finance to healthcare, transport and hospitality.
Like its manufacturing counterpart, it is a diffusion index centered on 50: above 50, services activity is generally expanding; below 50, it is generally contracting. The headline combines business activity, new orders, employment and supplier deliveries.
Why markets pay attention
Services account for the large majority of U.S. economic output and jobs, so this survey says a lot about where the economy as a whole is heading.
Its prices index is closely watched too: services inflation tends to be stickier than goods inflation, so signs of rising prices in services can weigh on expectations for Federal Reserve policy.
ISM Services and services activity
It comes out two business days after the ISM Manufacturing PMI. When the two surveys diverge — weak factories but strong services, for example — the services reading often carries more weight for the broader economy, although both shape the market's view of growth well before GDP is published.
Actual, Forecast and Previous
Every release on an economic calendar comes with three numbers:
- Actual
- The result just published. Nobody knows it until the release.
- Forecast
- The consensus of economists, known in advance — what the market largely expects and has already priced in.
- Previous
- The result for the prior period (sometimes revised). Useful context, but not what markets mainly react to.
Surprise = Actual − Forecast
The key point: markets react mainly to how far the Actual lands from the Forecast — the surprise — not to the change from the Previous value.
Actual > Forecast
Higher than expected.
Actual ≈ Forecast
About as expected — usually the smallest reaction.
Actual < Forecast
Lower than expected.
None of these comparisons decides the EUR/USD direction on its own. Whether "higher" is good or bad news depends on the indicator (more jobs usually reads as strength, more jobless claims as weakness), on the size of the surprise and on the market context.
How an ISM Services surprise is usually read
An Actual above the Forecast signals stronger services activity. Historically, that has more often supported the U.S. dollar — for EUR/USD, usually a move lower. An Actual below the Forecast has more often had the opposite effect.
A reading near 50 is more sensitive: a drop below 50 in the largest part of the economy can draw a lot of attention. The prices and employment components can also shift how the headline is read.
A simple example
Hypothetical numbers: Previous 52.8, Forecast 52.5, Actual 50.9. The surprise is −1.6 points — services are still expanding (above 50), but more slowly than expected.
If the prices component rose at the same time, the report sends a mixed message: softer activity, but firmer price pressure. Mixed reports like this often produce less decisive or shorter-lived reactions.
Why the same number can move markets differently
The size of the surprise matters
A result slightly off the Forecast may barely register, while a big miss can force a real rethink. Larger surprises have tended to produce larger and more consistent reactions — but not always.
Context changes over time
When inflation is the market's main worry, inflation data dominates; when growth is the worry, jobs and activity data can matter more. What the market already expects from the Federal Reserve also shapes how a surprise is read.
Details and revisions
Headlines come with details — revisions to earlier months, sub-components, other figures released at the same moment. They can confirm the headline or contradict it.
The first reaction is not the final one
The first move reflects the headline in the first seconds. As participants read the details, the market can extend that move, stall or reverse within minutes.
History is a guide, not a guarantee
Past releases show how markets have tended to react, which is useful. But every release happens in a new context, and past behavior does not guarantee the next reaction.
How to read EUR/USD
EUR/USD shows how many U.S. dollars one euro buys, so it tends to move opposite to the dollar: when the dollar strengthens, EUR/USD usually falls, and when it weakens, EUR/USD usually rises. Pairs where the dollar comes first, such as USD/JPY, tend to move with the dollar.
How NEXTMarketReaction reads this release
When a ISM Services PMI release is published, NEXTMarketReaction combines:
- the Actual, as soon as it is published;
- the Forecast (consensus) and the Previous value;
- the surprise — how far, and in which direction, the Actual landed from the Forecast;
- how EUR/USD has behaved after comparable ISM Services PMI releases in the past;
- calibrated historical probabilities, adjusted so that the percentages reflect how often similar situations actually played out;
- the horizon: 1, 3, 5, 8 or 15 minutes after the release.
The UP/DOWN percentage you see is a probability estimate based on history and a statistical model — not a certainty and not a recommendation. Even a high percentage leaves the opposite outcome possible.