WASHINGTON (Reuters] – The U.S. Services Industry saw its growth slow unexpectedly in April. Employment contracted for the second consecutive year and a measure measuring input prices soared to a new record.

On Wednesday, the Institute for Supply Management reported that its non-manufacturing index dropped to 57.1 from 58.3 last March. Reuters polled economists to forecast that the non-manufacturing indicator would remain unchanged at 58.5.

If the reading is above 50, it means that there has been an increase in activity within the U.S. services sector. This accounts for nearly two-thirds U.S. GDP. A surprise slowdown might be caused by persistent supply constraints. These have been made more difficult by COVID-19 lockdowns in China, Russia and the war on Ukraine.

This comes on the heels ISM’s Monday survey that showed manufacturing growth at its lowest rate for more than 1 1/2 years, in April. The potential warning sign for the economy could be the slowdown of the services sector.

Although the economy experienced a contraction of 1.4% annually in the first quarter due to a record trade deficit, this was not surprising. Domestic demand was solid with rising consumer spending and accelerating business investment in equipment.

ISM’s March reading of 60.1 was adjusted to show a 54.6 drop in new orders from service businesses. This moderation was despite the fact that spending has shifted back to services instead of goods. The pace of order backlog growth was slower than March’s and exports declined.

The services sector employment gauge declined to 49.5 in April, marking the second contraction of this year. It had rebounded to 54.0 in March. This is likely due to persistent worker shortages. According to the Labor Department, there was a record 111.5 million jobs available at the end March.

A slowdown in growth in factory employment last month could also temper hopes for job gains. A Reuters poll of economists found that nonfarm payrolls increased by 394,000 jobs in April, after increasing 431,000 in March.

From 63.4 in March, the ISM survey measured supplier deliveries at 65.1. A reading above 50% indicates slower deliveries. In this way, the services inflation increased. From 83.8 in March, the measure of input prices charged by service industries jumped to 84.6.

On Wednesday, the Federal Reserve will likely increase interest rates by half a percentage point. It is also expected that it will begin trimming asset holdings shortly. The U.S. central banks raised their policy interest rates by 25 basis points during March.