U.S. services sector activity picked up in August as strong demand lifted new orders to a 3-1/2-year high and drove input prices higher, suggesting inflation could remain elevated and compel the Federal Reserve to hike interest rates before the end of this year. The Institute for Supply Management said on Thursday its nonmanufacturing Purchasing Managers’ Index advanced to 55.4 last month from 54.1 in July.
Activities strengthened further in Aug-26. The ISM Services PMI rose to 55.4 from 54.1 in Jul-26, supported by stronger business activity (61.7) and new orders (60.9), both reaching multi-year highs. However, employment remained in contraction at 47.8, while the prices index climbed further to 72.6, signalling persistent cost pressures. The improvement was broadly consistent with the S&P Global Services PMI, which also rose sharply to 56.8 from 54.6, indicating a stronger expansion in service-sector activity..
In another release, initial jobless claims remained relatively low, rising marginally by 206K for the week ended 29th August (previous week: 204K), while the 4-week moving average increased to 207.3K (previous week: 205.5K). Continuing claims also edged higher to 1.779mn (previous week: 1.771m). Overall, the figures suggest that layoffs remain limited and the US labour market is still relatively stable, although the gradual rise in continuing claims and weak ISM services employment index point to some moderation in hiring conditions..
The latest data point to resilient rather than worsening US economic conditions, with stronger services demand offsetting some softness in hiring. For the 15–16 Sep FOMC meeting, these readings are unlikely to force an immediate change in policy setting. Nevertheless, MBSB said it expects the upcoming August employment and inflation readings remain critical—particularly as Fed officials have indicated that a renewed inflation pick-up could revive the case for rate hikes.
