Published Oct. 6, 2026. U.S. services-sector activity continued to expand in September, but the pace slowed and businesses reported the strongest input-price pressure in more than four years.
The Institute for Supply Management’s nonmanufacturing purchasing managers index fell to 54.9 from 55.4 in August, according to reporting published Oct. 5. Readings above 50 indicate expansion. Economists surveyed by Reuters had expected 55.2.
Prices paid rose to the highest level since July 2022
ISM’s prices-paid index increased to 74.0 from 72.6, with respondents identifying fuel, tariffs and supply-chain strain as major cost pressures. Copper, diesel, steel, petroleum-based products and memory components were among the items reported as more expensive.
Supplier deliveries slowed for a 22nd consecutive month, and order backlogs rose to their highest level since July 2022. The combination suggests that demand remains firm enough to strain capacity even as the headline services index eased.
Demand remained strong, employment returned to growth
New orders eased to 59.8 from 60.9 but remained firmly in expansion territory. Thirteen services industries reported growth, including retail trade, transportation and warehousing, finance and insurance, information, utilities, wholesale trade, and accommodation and food services.
The employment component rose to 50.1 from 47.8, moving back above the expansion threshold after two months of contraction. Businesses described a mixed labor picture: some were filling vacancies created by retirement or promotion, while others were restructuring around efficiency gains from AI tools.
What the report means for the Federal Reserve
The survey complicates the policy outlook. Stronger input costs point toward persistent inflation, while recent cooler inflation readings and slower payroll growth reduce pressure for an immediate rate increase. Market pricing can change quickly and should not be treated as a Federal Reserve forecast.
The services report follows AskNovus coverage of the September manufacturing PMI and the September jobs report. Together, the releases describe an economy still expanding but facing higher supply and energy costs.
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Featured image: Photo by Georgi Kalaydzhiev on Unsplash.