Inflationary pressures continued to rise in the services sector in July, surveys of business executives showed Wednesday.
The prices index of the Institute for Supply Management’s survey of executives in services businesses rose to 82.3 percent, up 2.8 percentage points and the highest level for its price index since 2005.
“Costs have risen dramatically in the last 45 days. Lodging, fuel, travel and supplies are all rising sharply. Costs for available labor are also rising, as demand increases in a diminished labor pool,” an executive in the construction industry said.
Far from being contained to just a few areas, all seventeen subsectors watched by ISM reported paying higher prices for goods and services used in their business. The biggest price increases were in Arts, Entertainment & Recreation, followed by Real Estate, Rental & Leasing, Mining, and Retail Trade. The smallest were in Professional, Scientific & Technical Services.
A separate survey by IHS Markit also found that high inflation is ongoing.
“On the price front, cost burdens increased at a substantial pace in July. Input prices rose due to supplier shortages, while service firms also highlighted greater fuel costs. The rate of inflation was much quicker than the series average, despite easing further from May’s historic peak,” the IHS Markit report said.
In its “composite” report, which looks at both services and goods-producing sectors, IHS said:
“Inflationary pressures remained substantial at the start of the third quarter. Input costs rose markedly, and at one of the fastest rates on record amid significant supplier delays and material shortages. Private sector firms noted further efforts to pass on higher costs, where possible, to their clients. As a result, output charges rose at the third-steepest pace since data collection began in October 2009.”
The surveys differed when it came to the pace of output growth. The ISM survey’s overall index rose to an all-time high, rising above the previous record set in May. The Markit survey rose at the slowest pace since February. Both surveys, however, indicate robust growth in the services sector and showed no signs of a slowdown from the resurgent virus.