A crucial update on activity in the mighty US services sector was broadly in line with expectations Wednesday, although a key subindex suggested demand is waning.

At 53.6, the headline ISM services print matched estimates, and fell slightly from the prior month.

The range of forecasts (I’ll be generous today and not call them “guesses”) from five-dozen economists was 52 to 55.

Meanwhile, the final read on S&P Global’s services gauge for September was 50.1, a tick lower from the flash estimate and on the brink of contraction.

Notably, both surveys indicated a steep moderation in new orders. Indeed, S&P Global flagged a second consecutive monthly drop amid weaker demand both at home and from abroad. “Companies depleted their backlogs of work at the fastest pace since November 2022 in order to sustain current business activity levels,” the release said.

ISM’s new orders gauge printed just 51.8, down markedly from 57.5 in August and the lowest reading since December.

“There has been a slight pullback in the rate of growth for the services sector, attributed to slower rates of growth in the New Orders and Employment indexes,” ISM’s Anthony Nieves remarked on Wednesday. Although firms are still generally upbeat, “some” respondents are concerned about “potential headwinds.”

The prices paid gauge in the ISM report was unchanged at 58.9. The color accompanying the S&P Global release pointed to entrenched price pressures. “Average prices charged for goods and services continue to rise at a rate well above the pre-pandemic average, with service sector charge inflation remaining especially stubborn, in part due to recent oil price hikes,” it read.

That’s problematic. Demand is plainly under pressure from higher rates, pinched household incomes, macro uncertainty and so on, but price pressures aren’t as responsive. This reminds me a bit of an irritable comment I received a year ago from a Wharton graduate who couldn’t fathom the idea that inflation might not respond to falling demand, or at least not as quickly as his textbooks led him to believe.

Spoiler alert: The world doesn’t work like it says in the textbooks. And economics isn’t a science, it’s just a hapless effort to derive “rules” from an equally hapless effort to quantify human behavior. You shouldn’t expect it to work.

In any case, demand destruction will help moderate price pressures eventually. We just don’t know how long that’ll take or, crucially, how much demand destruction will be required to bring inflation back down to 2%. And we also don’t know when, or from where, exogenous shocks might emanate in the meantime.

Commenting Wednesday, S&P Global’s chief business economist Chris Williamson said the revival of services demand seen in the spring “has gradually lost momentum amid the ratcheting up of interest rates and increased cost of living at a time of diminishing savings.” “The economy therefore looks to be moving into the fourth quarter on a weak footing,” he added.