US services sector activity slowed in September, with strong domestic demand stretching supply chains and raising prices paid by businesses for inputs, indicating that inflation could remain high into next year.
The sector expanded at a slower pace in Sep-26, with ISM Services PMI easing to 54.9 from 55.4 in Aug-26, slightly below market expectations of 55.2. Nevertheless, the reading remained firmly above the 50-point expansion threshold, indicating continued sustained momentum in the services sector amid resilient consumer spending and AI-related investment.
Meanwhile, inflationary pressures intensified, as the Prices Paid Index rose to 74.0 (Aug-26: 72.6), while the Supplier Deliveries Index increased to 53.2 (Aug-26: 51.3), suggesting persistent supply chain constraints. Encouragingly, the employment component returned to expansion territory at 50.1 (Aug-26: 47.8), pointing to continued stability in the labour market.
MBSB in its research note stated that the latest ISM Services PMI indicates that US economic momentum remained intact in Sep-26, although growth in the services sector eased slightly from the previous month. Demand conditions continued to be supported by consumer spending and AI-related investments, keeping overall activity in expansionary territory.
Meanwhile, higher input costs and slower supplier deliveries suggest that underlying price pressures remain elevated. The persistence of services inflation could continue to support a cautious monetary policy stance, particularly as inflation risks remain skewed to the upside.
