Service Sector Growth Slows as Input Costs Surge to 2022 Highs

Key Details The U.S. service economy expanded at a slower pace in March as employment contracted and input price pressures intensified. The ISM Services Index fell 2.1 points to 54, while the price gauge for services and materials jumped to 70.7, marking the highest reading since October 2022. This 7.7-point monthly increase was the largest in nearly 14 years. Why It Matters Rising energy and material costs are creating significant headwinds for fleets and service providers. The Iran conflict has disrupted oil supplies through the Strait of Hormuz, pushing diesel and gas prices higher across industries. Companies are building inventory buffers and adjusting operations to manage supply chain uncertainties and expected fuel cost increases. Employment Concerns The ISM employment index plunged 6.6 points to 45.2, one of the steepest monthly drops since the pandemic. This signals weakening hiring momentum despite government data showing 178,000 payroll gains in March. Thirteen service sectors reported growth, though retail trade contracted alongside two other industries. Bottom Line Fleets should prepare for sustained cost pressures in fuel and input materials as geopolitical tensions persist. Business activity growth is moderating, making cost management and fuel surcharge strategies increasingly critical for profitability.