Service businesses report their highest price pressure since 2022
ISM’s September services price index reached 74.0. Demand is still growing, but fuel, labor and software charges are weighing on operating costs.
Persistent
What changed?
ISM’s Services PMI remained in expansion at 54.9 in September, down slightly from 55.4 in August. Its Prices Index rose to 74.0 from 72.6, the highest reading since July 2022. That index has stayed above 60 for 22 consecutive months, according to ISM.
New orders remained strong at 59.8, while employment barely returned to expansion at 50.1. Survey respondents reported higher fuel and labor costs, software-licensing charges, and pressure on some building and electrical supplies. The index measures the breadth of price increases, not the percentage increase in bills.
Why does it matter?
Professional firms and other service operators may face higher vendor and payroll costs without a matching increase in billable work. The survey also reported that accommodation and food services had a decline in business activity in September, while health care and professional services reported growth. Those industry readings are directional survey responses, not revenue estimates.
For construction-related services, ISM found declining business activity and new orders. The broader services expansion therefore should not be read as a positive signal for every service category.
Who is most exposed?
Labor-intensive professional practices, health-service operators with fixed reimbursement or contracted rates, lodging operators exposed to fuel and supply costs, and construction firms bidding long-duration work.
What should businesses watch next?
October ISM service prices, supplier quotes, renewal pricing for software and insurance, and changes in new orders by industry. Watch whether higher costs reach customer invoices or are absorbed in margins.
Trend check: Persistent service input-price pressure across 22 months, with a new multi-year high in the September index.
Related Industry Intelligence: Professional Services · Health & Wellness · Hotels & Lodging · Construction & Trades