The Institute for Supply Management said its services index fell 0.4 point to 54.5 in October, the slowest pace of growth in three months.
Economists polled by Reuters had forecast the PMI little changed at 54.8.
The miss came mostly from demand. New orders dropped 3.9 points to 55.9, a four-month low, while business activity fell 2.7 points to 53.8.
The reading is 0.2 point above the index's 12-month average of 54.3, the 10th straight month that average has increased.
Factories moved the other way in the same week. The manufacturing PMI rose a point to 55.5 in October, with production up 2.3 points to 59.0.
Bar chart. Index Level. Nov 25: ISM Services PMI 52.40. Dec 25: ISM Services PMI 53.80. Jan 26: ISM Services PMI 53.80. Feb 26: ISM Services PMI 56.10. Mar 26: ISM Services PMI 54. Apr 26: ISM Services PMI 53.60. May 26: ISM Services PMI 54.50. Jun 26: ISM Services PMI 54. Jul 26: ISM Services PMI 54.10. Aug 26: ISM Services PMI 55.40. Sep 26: ISM Services PMI 54.90. Oct 26: ISM Services PMI 54.50.
Orders are slowing while deliveries get later
Supplier deliveries jumped 3.5 points to 56.7, the 23rd straight month of slower delivery performance, and 14 industries reported delays with none reporting faster shipments.
Order backlogs climbed 1.4 points to 58.0, the highest reading since July 2022, when the index hit 58.3.
Slower deliveries push the composite index up, so part of October's 54.5 reflects supply friction instead of demand strength.
Fifteen services industries grew, two more than in September. Construction and health care were the only two that shrank, and construction has now reported falling new orders for three months running.
Costs are still the sticking point
The prices index eased a point to 73.0 from September's 74.0, its 113th consecutive month of increases, with 17 industries reporting higher costs and none reporting lower ones.
Fuel was up in price for a ninth month and memory products for a 10th, while computers, memory components, and wire and cable stayed in short supply.
Hiring improved, with the employment index up 1.3 points to 51.4, its second month above 50 and the best since February.
New export orders swung 8.3 points higher to 55.2 after one month in contraction, and imports rose 1.3 points to 54.2.
All 10 indexes sat in expansion at the same time for the first time since February 2026, per the ISM report.
ISM also said the October reading corresponds to a 2 percentage point increase in real GDP on an annualized basis, with the overall economy expanding for a 77th straight month.
For households, the pressure shows elsewhere. Inflation-adjusted disposable income fell in September, and the saving rate sits at a four-year low of 3.8%.
The Federal Reserve left its benchmark rate in the 3.75% to 4.00% range last week while calling inflation elevated.
Services make up more than two-thirds of US economic activity, so a cooling order book there carries more weight than a strong factory month. A separate Markit services gauge also came in under forecast at 56.1 against an expected 57.9.
November data lands Dec. 3.
