Prices paid by US services companies rose to their highest level in four years in August, adding to cost pressures across the economy even as demand remained strong, the Institute for Supply Management said.
The ISM Services Prices Index rose to 72.6% from 70.3% in July, its highest reading since August 2022. Prices increased across 15 services industries surveyed, with transportation and warehousing among the sectors reporting higher costs.
The broader services sector also strengthened. The Services PMI rose to 55.4% from 54.1% in July, marking its 26th straight month of expansion. The Business Activity Index climbed to 61.7%, while the New Orders Index rose to 60.9%, pointing to stronger demand.
But businesses continued to face pressure from higher input costs. Companies reported increases in diesel, fuel, gasoline, food products, freight, labor, software licensing and petroleum-based products.
Employment remained a weak spot. The Services Employment Index stayed in contraction at 47.8%, suggesting companies are still reluctant to add workers despite stronger demand.
Analysts say the services price increase adds to concerns that inflation is broadening beyond goods. Those cited by Reuters said the rise could keep inflation above the Fed’s 2% target for longer and strengthen the case for an interest rate hike later this year.
