The U.S. services sector remained in growth territory during September, but activity slowed slightly as businesses faced increasing costs and supply-chain pressure.
The Institute for Supply Management’s non-manufacturing PMI fell to 54.9 from 55.4 in August. A reading above 50 still indicates expansion, meaning the services economy continued to grow despite the slowdown.
One of the biggest concerns for businesses is rising input costs. The prices-paid index increased to 74.0, its highest level since July 2022. Companies reported higher costs for fuel, copper, steel, petroleum products and other materials.
At the same time, order backlogs increased for the eighth consecutive month, reaching their highest level since July 2022. Strong consumer demand and business investment are supporting activity, but companies are finding it more difficult to keep up with demand.
The data could also influence expectations for U.S. interest rates. Persistent price pressures may make it harder for policymakers to reduce borrowing costs quickly, although weaker employment growth has reduced expectations of an immediate rate increase.
For businesses, the latest figures highlight a challenging environment: demand remains relatively strong, but rising costs and supply-chain pressures could continue affecting profits and prices.
