March Services Growth Cools as Price Index Hits Highest Since 2022, ISM Says

12:22 PM EDT, 04/06/2026 (MT Newswires) -- US services growth slowed more than expected in March, with the price measure reaching its highest level in more than three years amid elevated oil and fuel costs due to the ongoing Middle East conflict, the Institute for Supply Management said Monday.

The ISM's purchasing managers' index declined to 54 last month from 56.1 in February. The consensus was for a 54.9 print in a survey compiled by Bloomberg. A reading above 50 indicates the services sector economy is generally expanding.

The price index climbed to 70.7 in March from 63 the previous month, its highest reading since October 2022. The gauge for business activity dropped to 53.9 from 59.9, the lowest level since September.

Energy prices have surged as the US-Israel war with Iran, now in its sixth week, has curtailed shipments through the Strait of Hormuz. The conflict has spread across the Middle East, with Gulf countries continuing to intercept missiles and drones fired by Tehran.

"Supply chains showed renewed strain: supplier delivery times slowed yet again, reflecting shipping disruptions linked to the Middle East conflict," BMO Capital Markets Senior Economist Priscilla Thiagamoorthy said in a note Monday. "Services inflation risks are building again, amid higher energy costs and transportation disruptions tied to the Iran war."

New orders advanced to 60.6 from 58.6, representing its highest reading since February 2023. That suggests underlying demand for services remains healthy, according to Thiagamoorthy. The employment measure decreased to 45.2 from 51.8, its lowest level since December 2023.

"With employment softening and inflation pressures flaring up again, the data suggest slower growth alongside sticky price pressures," Thiagamoorthy said. "This keeps the (Federal Reserve) in a difficult position and reinforces the case for patience."

Markets widely expect the central bank to keep its benchmark lending rate unchanged later this month, according to the CME FedWatch tool.

On Friday, S&P Global (SPGI) said its services PMI gauge moved down to 49.8 in March from 51.7 the month prior, marking the sector's first decline in more than three years. The contraction was accompanied by the "weakest rise" in new work since April 2024, while confidence in the outlook deteriorated amid rising cost pressures, according to S&P Global (SPGI).

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