Service Sector Growth Slows to 54.0 as Inflation Hits 2022 Highs

The U.S. service sector experienced a slowdown in March, even as inflationary pressures reached their highest point since 2022. According to the latest data from the Institute for Supply Management (ISM), the headline services PMI declined to 54.0, down from 56.1 in the previous month. The figure fell short of analyst expectations, which had projected a reading of 55.0.

While the contraction in growth highlights a deceleration in industry activity, the report also underscored mounting economic headwinds. Specifically, the prices paid index saw a significant spike, marking the highest level observed since 2022. Economists attribute this inflationary surge to a recent oil shock stemming from geopolitical tensions involving Iran, which is now manifesting in broader economic costs. Additionally, the data indicated a contraction in employment levels within the services sector, further complicating the outlook for domestic growth as businesses grapple with rising input costs.