It’s a miss. Wait, I have to snap everyone out of their equity melt-up stupor, so let me shout it: “IT’S A MISS!”

Business activity across the sprawling US services sector slipped into contraction territory last month for the first time since 2020, and most key underlying indexes in Friday’s ISM update were likewise disappointing. The release counted as a miss pretty much across the board.

The new orders gauge tumbled nearly six points to 50.4, erasing a sharp rebound registered in August and rekindling demand concerns.

As the figure shows, both the orders and production gauges fell markedly over the month. The implication: Activity and future demand are back on the brink of contracting, although I should note the backlogs gauge moved up sharply (it’s still below 50).

“September’s PMI level returned to numbers very similar to May and July, with weakness in business activity and continued weakness in employment,” ISM’s Steve Miller remarked, adding that “commentary in general indicated moderate or weak growth.”

The lackluster showing comes 48 hours after another unfortunate read on US manufacturing. At 50 on the nose, the services headline print for September dropped two points, missed estimates and is now poised to join the factory gauge in contraction.

Do note that this is the same conjuncture observed in July and May, when both marquee activity measures were either in contraction simultaneously or nearly so.

The tariffs came up 10 times in Friday’s services report. Some respondents were blunt. “Tariffs continue to inject an unnecessary level of uncertainty across the broader economy,” one panelist said. “We are beginning to see the impact of the tariffs impact our business,” said another.

(And here David Zervos told me all this talk of uncertainty was a “hoax,” and that you could tell because the stock market was at all-time highs. Some purchasing managers appear to disagree. But what do they know, right?)

The employment index in the ISM release printed 47.2. That’s not good, even if it’s better than August.

At the same time, the prices gauge came in at 69.4 up from August and indicative of pervasive input cost pressure.

So, stagflation it is. Or at least according to both ISM reports covering September.

Somebody forgot to tell them it’s unpatriotic to suggest the US economy’s anything other than gangbusters.