The U.S. services sector experienced its first contraction since June 2024, according to the Institute for Supply Management (ISM), with a PMI of 49.9 for May 2025. This decline signals growing economic concerns amid persistent inflationary pressures and rising input costs. Businesses are grappling with increasing input prices, leading them to pass these burdens on to consumers in order to maintain profitability. New orders also experienced a contraction during this period, as measured by the New Orders Index at 46.4%. This signifies decreased demand for services. Notably, the input price index rose significantly to 68.7 for May, reaching its highest point since November 2022. Analysts are anticipating potential ripple effects including further increases in consumer prices and potentially exacerbating inflation.