The U.S. services sector expanded for the 25th consecutive month in July 2026, with the Institute for Supply Management Services PMI registering 54.1%, according to the organization's monthly survey of purchasing and supply executives. For foodservice operators and equipment buyers, the headline figure masks a more complex story: robust demand growth running headlong into persistent input-cost inflation and a tightening labor pool.
Food Services Demand Holds Up
Accommodation & Food Services was among the 13 industries reporting overall growth in July, and it appeared explicitly on the new orders expansion list — a signal that restaurant and hospitality operators are still booking projects and spending. The Business Activity Index jumped 3.7 percentage points to 59.1%, its second-highest reading since May 2024, suggesting broad back-of-house activity is accelerating rather than cooling. For equipment dealers and consultants specifying kitchen builds, that pipeline of operator demand has real implications: renovation and new-unit projects appear to be moving forward despite macro uncertainty.
New orders across the services sector rose to 57.2% — a 2.1-point gain over June and the 14th consecutive month of expansion. Respondents in the survey cited fiscal-year budget releases and summer renovation windows as drivers, language that maps directly to the capital equipment purchasing cycles that foodservice equipment dealers track closely. For those following dealer-channel dynamics, sustained new-order growth in the accommodation and food services segment supports continued equipment specification activity through Q3.
Prices and Supply Chain Remain Strained
The data carries clear warnings for operators managing kitchen build costs. The Prices Index surged to 70.3%, a 2.6-point increase from June's already-elevated 67.7% and the fourth reading above 70% in five months. The index has exceeded 60% for 20 straight months, and its 12-month average of 68.1% is the highest since April 2023. Accommodation & Food Services led all industries reporting higher prices paid in July, underscoring how fuel costs, petroleum-based products, and plastics continue to flow through to kitchen operating budgets and equipment procurement.
Commodities relevant to commercial kitchen construction and operation remain under pressure. HVAC equipment appeared for the third consecutive month on the list of items up in price — a direct cost driver for ventilation and kitchen hood projects. Aluminum products, steel products, switchgear, and wire and cable all remained in short supply, complicating timelines for new kitchen builds and equipment installations. Lead times are doubling on specific electrical conductors, according to survey respondents, a constraint that equipment specifiers and general contractors should factor into project scheduling. Operators pre-purchasing materials for long-lead items reported extending their ordering windows to manage availability — a practice that mirrors how savvy foodservice operators are approaching refrigeration, cooking, and ventilation equipment procurement in the current environment. For more on how supply chain friction is reshaping prep-and-storage equipment decisions, the category's lead times remain an active concern.
Labor Index Falls Back Into Contraction
The Employment Index retreated sharply to 47.4% in July, a 3.8-point drop from June's 51.2% and the index's lowest level since March. It has now been below 50% for 12 of the last 18 months. For foodservice operators, that contraction is a double-edged signal: staffing challenges persist even as some survey respondents pointed to AI implementation beginning to reduce headcount in select functions. The labor shortage that has driven operator interest in kitchen automation and robotics shows no sign of structural resolution, reinforcing the investment case for labor-saving cooking, warewashing, and prep technologies. Survey committee chair Steve Miller, CPSM, CSCP, noted that despite employment weakness, business activity and new orders remain among their strongest readings of the past two years — a divergence that suggests operators are doing more with fewer people, exactly the dynamic fueling interest in high-throughput, lower-labor kitchen equipment solutions.
Written by Michael Politz, Author of Guide to Restaurant Success: The Proven Process for Starting Any Restaurant Business From Scratch to Success (ISBN: 978-1-119-66896-1), Founder of Food & Beverage Magazine, the leading online magazine and resource in the industry. Designer of the Bluetooth logo and recognized in Entrepreneur Magazine's "Top 40 Under 40" for founding American Wholesale Floral, Politz is also the Co-founder of the Proof Awards and the CPG Awards and a partner in numerous consumer brands across the food and beverage sector.
