United States services sector growth slowed in March, while input prices surged amid the Iran war.
The Institute for Supply Management’s (ISM) Services PMI was 54%, declining from 56.1% in February. This is also below Reuters-polled economists’ forecast of 54.9%.
“March’s Services PMI® features the third month in a row with an increase in the 12-month PMI® average, up 0.6 percentage point from 51.7 percent in December 2025 to 52.3 percent. However, six of the 10 subindexes decreased month-over-month,” said ISM services business survey committee chair Steve Miller.
The ISM’s index measuring input prices surged 7.7 percentage points to 70.7%, its highest reading since 2022 and its largest percentage increase in over 13 years. The index has exceeded 60% for 16 consecutive months.
According to survey respondents, the Iran war has disrupted shipping for the construction sector, while rising fuel prices have significantly raised operational costs for the airline industry.
“Companies across many industries reported seeing higher gas and diesel pricing, and inventories of multiple goods increased to withstand supply chain disruptions or short-term oil price impacts. Such construction products as lumber, copper and steel were noted as up in price,” according to Miller.
The business activity index fell from 59.9% to 53.9%, and the inventories index dropped 1.6 percentage points to 54.8%.
The employment index also dipped for the first time in four months, declining 6.6 percentage points to 45.2%. The new orders index rose 2 percentage points to 60.6%.
Per the ISM, 13 services industries, including wholesale trade and finance & insurance, grew in March. Three industries contracted: retail trade, agriculture, forestry, fishing & hunting, and public administration.
