With energy prices rising due to the fallout from the war between the United States and Iran, inflationary pressure facing the U.S. services sector has surged to the highest level in about four years.
According to the March U.S. services Purchasing Managers Index (PMI) report that the Institute for Supply Management (ISM) released on the 6th (local time), the services prices index was 70.7, up 7.7 points from the previous month.
This is the same level as in Oct. 2022, when oil prices spiked after Russia's invasion of Ukraine, and the highest in about 3 years and 5 months. When this index is above 50, it indicates that corporations are facing upward price pressures.
PMI is a leading economic indicator compiled by surveying senior purchasing and supply officers at corporations on new orders, inventories, employment conditions, and more.
In particular, given that the services sector accounts for more than two-thirds of the U.S. economy, the broadened upward pressure on services prices is assessed as a potential driver of overall U.S. inflation going forward.
A respondent in the real estate industry said in the survey, "The Iran war has added further uncertainty on top of an already fragile macroeconomic environment," noting, "A surge in inflation driven by rising oil prices will erode purchasing power and affect all industries."
Meanwhile, the March services PMI was 54.0, down 2.1 points from the previous month, but it remained above the 50 baseline, indicating continued expansion.
Of the 16 industries tracked by ISM, 13 showed expansion, excluding retail trade, agriculture/forestry/fishing, and public administration.