Services Growth Cools, But PMI Remains in Expansion — Evening Brief – 04.06.26

U.S. services activity cooled in March but remained comfortably in expansion territory, pointing to a still-resilient services economy contending with higher input costs and fresh supply frictions.  

The ISM Services PMI Index slipped to 54.0 from 56.1 in February, missing the 54.7 consensus, according to the Institute for Supply Management. The latest reading suggests growth in the services sector slowed as the Middle East conflict and winter weather weighed on activity, while still marking the second-strongest print since October 2024. 

Inflation pressures within the survey intensified. “The Prices Index increased, as expected, amid higher oil and fuel costs, and the Supplier Deliveries Index indicated slower performance compared to February, also unsurprisingly, with shipping issues and flight disruptions due to the Middle East conflict and winter weather,” said Steve Miller, chair of the ISM Services Business Survey Committee. The Prices Index rose to 70.7 from 63.0, underscoring renewed cost pressure for services providers. 

Growth remained broad-based but slightly less than a month earlier. Thirteen industries reported expansion in March, one fewer than in February, while three remained in contraction. The March headline reading of 54.0 stood 1.7 percentage points above the 12‑month average of 52.3, itself 0.3 percentage point higher than in February, highlighting a modest trend improvement. 

Under the surface, the details were mixed. New orders strengthened to 60.6 from 58.6, but business activity/production slipped to 53.9 from 59.9. Employment fell to 45.2 from 51.8, its first contraction in four months, signaling more caution around hiring.  

The Supplier Deliveries Index climbed to 56.2 from 53.9, its 16th straight month in expansion, indicating slower delivery performance; ISM noted that this index is inversed, so readings above 50 point to slower deliveries that often accompany improving demand.