The ISM said its services PMI fell to 50.0 in September from 52.0 in August, with a reading of 50.0 serving as the breakeven point between expansion and contraction. Economists had expected the index to edge down to 51.7.

The bigger than expected decrease by the headline index partly reflected a downturn by business activity, as the business activity index slumped to 49.9 in September from 55.0 in August. The index entered contraction territory for the first time since May 2020.

The new orders index also tumbled to 50.4 in September from 56.0 in August, while the employment index crept up to 47.2 in September from 46.5 in August but remained in contraction territory for the fourth month in a row.

Meanwhile, the report said the backlog of orders index surged to 47.3 in September from 40.4 in August, still indicating contraction but reaching its highest reading since April.

The supplier deliveries index also rose to 52.6 in September from 50.3 in August, with the ISM noting a reading of above 50 percent indicates slower deliveries, which is typical as the economy improves and customer demand increases.

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