US Services Sector Growth Slows Amid Supply Constraints

The US services sector maintained its strong pace of growth in July, but supply constraints are driving up input costs for businesses and keeping inflation elevated.

The Institute for Supply Management's (ISM) nonmanufacturing purchasing managers index rose to 54.1 last month from 54.0 in June, with a reading above 50 indicating growth in the services sector.

Most economists viewed the data as supportive of expectations that the Federal Reserve would raise interest rates this year, with Priscilla Thiagamoorthy, a senior economist at BMO Capital Markets, saying the combination of price pressures and robust demand is likely to reinforce a higher-for-longer policy stance at the Fed.