U.S. services sector activity slows in September amid increasing price pressures

Investing.com - U.S. services sector activity slowed in September, weighed down by elevated input prices reflecting ongoing inflationary pressures linked in part to the Iran war.

The Institute for Supply Management's non-manufacturing purchasing managers' index stood at 54.9 last month, down from 55.4 in August. A reading above 50 denotes expansion in the services industry, which accounts for roughly two-thirds of overall U.S. economic growth.

Economists had anticipated that the gauge would come in at 55.1.

A separate measure of prices paid by services business climbed to 74.0 from 72.6 in the preceding month, echoing a similar jump in the ISM's manufacturing sector released last week. Fuel costs have spiked, largely because of the Iran war, while a surge in spending on artificial intelligence infrastructure has kept upward pressure on inflation.

Taken together, the two surveys suggest that elevated price gains remain a major issue for U.S. businesses, a trend that could factor into how Federal Reserve rate-setters approach their next decisions this month and in December.

Recently, some policymakers have indicated that they are not in a rush to raise interest rates in October, after the Fed lifted borrowing costs for the first time since 2023 in September.

Softer-than-expected employment data for September also bolstered expectations that the central bank will stand pat at its next monthly gathering, with officials keen not to dent what has been a broadly resilient economy. In theory, raising rates can help quell inflation, albeit at the risk of hitting overall growth and the labor market.

Underlining the broader strength of the U.S. economy, a measure of new orders edged down to 59.8 last month from 60.9 in August, which was the highest level since 2023. While supply chains have been crimped by the Iran war, added constraints have come from solid demand.

A metric of supplier deliveries also rose to 53.2 from 51.3. A reading above 50 points to slower deliveries, partially because of the impact of tariffs on imports.

(Reuters contributed reporting)

Original Article

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