U.S. services businesses reported a sharp increase in the prices they paid for inputs in August, with the Institute for Supply Management’s Services Prices Index reaching 72.6, its highest reading since August 2022. Services activity and new orders also strengthened, providing fresh data on business costs and inflation pressures.
Key Takeaways
- The ISM Services Prices Index rose to 72.6 in August from 70.3 in July.
- August’s reading was the highest since August 2022.
- The Services PMI increased to 55.4 from 54.1.
- The New Orders Index climbed to 60.9 from 57.2.
- Services account for more than two-thirds of U.S. economic activity.
Services Input Prices Reach Their Highest Level Since 2022
The ISM Services Prices Index rose to 72.6 in August from 70.3 in July, marking its highest level since August 2022. The measure tracks prices paid by services businesses for inputs and provides an indicator of cost pressures faced by companies operating across the services economy.
The August increase occurred alongside stronger services activity. The ISM Nonmanufacturing Purchasing Managers’ Index increased to 55.4 from 54.1 in July. A reading above 50 indicates that activity in the services sector is expanding.
The combination of stronger activity and higher input prices produced two separate signals from the same monthly survey. Businesses reported increased demand through their orders and activity measures while also reporting higher prices for the inputs required to provide services.
The prices measure also became a factor in assessments of U.S. inflation. The higher reading indicated that price pressures were not limited to goods, with services businesses reporting elevated costs in August. Economists cited the data as evidence that inflation could remain above the Federal Reserve’s 2% target for some time.
For additional context on the services inflation data, an earlier analysis of U.S. services inflation pressures examined elevated prices within the sector and their effect on business costs.
U.S. Services Activity Strengthens in August
The Services PMI rose by 1.3 points in August to 55.4. Because services account for more than two-thirds of U.S. economic activity, the monthly reading provides information about the pace of activity across a large portion of the economy.
The August increase followed a Services PMI reading of 54.1 in July. The higher August figure indicated continued expansion in services activity, with the survey showing stronger business conditions during the month.
The activity data were accompanied by a sharp increase in new orders. The ISM New Orders Index rose to 60.9 from 57.2 in July, reaching its highest level since February 2023. The increase provided a separate measure of demand received by services businesses.
The August figures therefore showed stronger readings for both current services activity and incoming orders. The higher order index also provided evidence that businesses were receiving more orders as the services sector expanded.
New Orders Rise to Their Highest Level Since February 2023
The New Orders Index reached 60.9 in August, up from 57.2 in July. The reading was the highest since February 2023 and represented one of the clearest changes in the services survey during the month.
New orders measure the volume of orders received by services businesses and provide information about demand entering the sector. The August increase occurred at the same time that the overall Services PMI moved higher.
The stronger orders reading was linked in the reported analysis to strong domestic demand. Consumer spending and investment connected to artificial intelligence were identified as sources of demand, while supply constraints were cited alongside the resulting price pressures.
The services data therefore contained both demand and cost information. Higher new orders indicated stronger incoming business, while the prices index showed that services companies were paying more for inputs. The two measures provide different information about conditions within the sector.
The increase in orders also matters because services represent a large share of U.S. economic output. Changes in orders can provide an indication of the level of business activity before those orders are reflected in completed services and related economic measures.
A previous report on private-sector business expansion also examined stronger services activity alongside higher input costs and selling prices.
Strong Domestic Demand Drives Services Activity
The August services data pointed to strong domestic demand as an important source of activity. The reported analysis linked higher prices to consumer spending and investment associated with artificial intelligence, with that demand encountering supply constraints.
Consumer spending forms part of the demand reaching services businesses, while investment connected to artificial intelligence was identified as another source of activity. The report also noted that some domestic demand was being met through imports.
That import activity was visible in separate trade data released for July. The U.S. trade deficit increased 24.4% to $88.6 billion, while imports rose 2.8% to $399.3 billion. Goods imports increased 3.7% to $320.6 billion.
Capital-goods imports increased by $14.4 billion to a record $140.3 billion. The increase included computers, computer accessories and semiconductors, with the reported analysis linking those purchases to the artificial-intelligence buildout.
The trade figures provide additional evidence of strong domestic demand but also show that part of that demand was being met through imported goods. The interaction between domestic demand, imports and business investment formed part of the economic picture reported alongside the services data.
Higher Input Prices Add to U.S. Inflation Pressures
The increase in services input prices added a further measure of price pressure to the economic data released in early September. The ISM Services Prices Index reached 72.6, compared with 70.3 in July, while services activity and new orders both increased.
The prices reading was the highest since August 2022. Economists cited the measure as evidence that recent inflation was not confined to the goods sector and said the data suggested inflation could remain above the Federal Reserve’s 2% target for a period of time.
The services data also entered the discussion around Federal Reserve interest-rate policy. Federal Reserve Governor Christopher Waller said he was inclined to support keeping rates steady in September if upcoming inflation data confirmed that price pressures were cooling. He said the decision would depend heavily on forthcoming consumer and producer price data.
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The labor market provided another piece of the policy picture. Initial claims for state unemployment benefits increased by 2,000 to a seasonally adjusted 206,000 for the week ended August 29. Continuing claims increased by 8,000 to 1.779 million for the week ended August 22.
The combination of services prices, services activity and labor-market data gave policymakers several measures to consider. The services survey showed stronger activity and orders alongside higher input prices, while weekly unemployment claims remained near the lower end of their range for the year.
The August services figures also came before the release of the U.S. employment report for the month. Economists surveyed by Reuters expected nonfarm payrolls to rebound by 56,000 after a 23,000 decline in July, with the unemployment rate forecast at 4.1%. Those figures were expectations rather than the reported employment results.
The services survey’s combination of stronger orders and elevated input prices provides a specific measure of conditions within the U.S. services economy. The 72.6 prices reading, together with the 55.4 Services PMI and 60.9 New Orders Index, showed that higher business costs were occurring alongside increased activity in August.
For broader inflation context, the Core PCE methodology changes provide additional background on how the Federal Reserve’s preferred underlying inflation measure is calculated.
Frequently Asked Questions
What are U.S. services input costs?
U.S. services input costs are the prices services businesses pay for the inputs needed to operate and provide services. The ISM Services Prices Index measures changes in prices paid by services businesses for those inputs.
How high did the ISM Services Prices Index reach in August 2026?
The ISM Services Prices Index reached 72.6 in August 2026, up from 70.3 in July. The August reading was the highest since August 2022.
What was the U.S. Services PMI in August 2026?
The ISM Services PMI increased to 55.4 in August from 54.1 in July. A reading above 50 indicates expansion in the services sector.
How did new orders change in the August 2026 services report?
The ISM New Orders Index increased to 60.9 in August from 57.2 in July. It was the highest reading for the index since February 2023.
How do higher services input prices affect U.S. inflation?
Higher input prices indicate that services businesses are facing increased costs. The August reading was cited as evidence that price pressures extended beyond goods and could contribute to inflation remaining above the Federal Reserve’s 2% target.
