U.S. businesses are facing a new mix of strong demand and rising operating costs as the services sector continued expanding in September, but at a slower pace.

The Institute for Supply Management’s services index fell to 54.9 in September from 55.4 in August, remaining above the 50-point level that signals growth. However, the prices-paid index jumped to 74.0, its highest level since July 2022, highlighting renewed cost pressures for American companies.

Businesses reported higher costs for fuel, steel, copper and other materials, while supply-chain delays and transportation expenses continued to create challenges. At the same time, strong consumer demand and business investment in artificial-intelligence infrastructure continued supporting economic activity.

The latest business data comes as U.S. financial markets remain near record levels. On Monday, the S&P 500 gained 0.7%, while the Nasdaq rose 1.1% to a record close. Investors are now watching corporate earnings and inflation closely for clues about the direction of interest rates.