Service Prices Surge to Four-Year High While Wages Lag Behind

Service prices in the U.S. have surged to a four-year high, while wage growth has hit a five-year low, creating a challenging economic environment for households. The Institute for Supply Management reported that its services prices index rose to 74.0 in October 2026, the highest level since July 2022. This indicates widespread price increases as a reading above 50 means more firms are paying higher prices than lower ones.

Meanwhile, wage growth has stalled. The U.S. Bureau of Labor Statistics reported that average hourly earnings rose just 0.1% in September, reaching $37.81. The annual rate of 3.0% was the slowest since May 2021. Consumer prices have risen 3.4% through August, outpacing wage growth and reducing purchasing power for the average worker.

Companies are feeling the squeeze as well. Steve Miller, who chairs the services survey, noted that "tariffs and fuel cost impacts were the most cited issues impacting respondents’ supply chains." High diesel fuel costs and shipping container expenses have doubled, driving up costs across various sectors. Factories are also under pressure, with the manufacturing prices index reaching 77.9.

Consumer stocks showed mixed reactions on October 5. TJX Companies led with a 1.3% gain, Walmart rose 0.78%, and Costco edged up 0.31%. However, McDonald’s added just 0.49% despite weak traffic, and its stock is down 22.26% year to date. The economic strain is pushing households to trade down to cheaper options, benefiting discount retailers like TJX and Walmart.