• The ISM Services Prices Paid Index fell to 65.4% in November, its lowest level since April 2025.
  • The 4.6-percentage-point drop from October's 70.0% marks a significant pullback from elevated price pressures.
  • The decline in services costs contrasts with rising prices in the manufacturing sector, highlighting a divergence in inflationary pressures across the economy.

A key measure of U.S. services sector inflation showed a notable cooldown in November, offering a potential signal that price pressures may be starting to ease in the largest part of the American economy. The Institute for Supply Management’s Services Prices Paid Index fell to 65.4 percent last month, down sharply from 70.0 percent in October. This reading, the lowest since April, represents the first substantial decline after months of stubbornly elevated readings and suggests the intense cost pressures that have characterized 2025 might be moderating.

While still well above historical norms—any reading above 50 indicates expansion in prices—the drop of 4.6 percentage points was welcomed by market observers looking for cracks in the inflationary facade. The services sector itself continued a modest expansion, with the overall ISM Services PMI rising to 52.6 percent in November. However, the cooling price component stands in stark contrast to trends in manufacturing, where the ISM Manufacturing Prices Paid Index ticked up to 58.5 percent in November from 58.0 percent the prior month. That marks the 14th consecutive month of rising raw materials costs for goods producers.

This divergence paints a nuanced picture for the Federal Reserve. "You're seeing a tale of two sectors," said one analyst who reviewed the data. "Services, which is driven more by labor and domestic demand, is finally showing some give. But manufacturing, which is tangled in global supply chains and trade policy, remains under persistent cost pressure." The data underscores how U.S. trade and tariffs policy continues to contribute to elevated prices and weak demand conditions in specific parts of the economy, according to recent business surveys.

The report also contained concerning signals on the employment front, with employment indices for both services and manufacturing remaining in contraction territory. This persistent weakness suggests that the moderation in services prices may be linked more to softening demand than to improvements in the labor supply or productivity. Businesses, facing higher financing costs and uncertain demand, appear to be pulling back on hiring even as some input cost pressures ease.

For policymakers, the mixed signals complicate the path forward. The cooling in services inflation could support arguments for a less restrictive monetary policy stance in 2026, but the stickiness in manufacturing costs and weak job market data provide ample reason for caution. The immediate market reaction was muted, with Treasury yields holding steady as traders digested the conflicting indicators. A spokesperson for the ISM did not immediately respond to a request for further comment on the sectoral divergence.

Correction: An earlier version of this article misstated the number of consecutive months the Manufacturing Prices Paid Index has risen. It is 14 months, not 13.