Service Prices Just Hit a 4-Year High While Wage Growth Hit a 5-Year Low
Shipping costs are soaring and wages are stalling, leaving households caught between rising prices and shrinking paychecks. The companies best positioned to survive this squeeze may not be the ones you expect.
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A retailer told the Institute for Supply Management that “Shipping containers from overseas doubled in cost, causing price increases”. The comment appeared in the services survey released on October 5, 2026.
The Institute for Supply Management said its services prices index rose to 74.0 from 72.6. That is the highest reading since July 2022.
A reading above 50 means more firms are paying higher prices than lower ones. That shows how widespread the increases are.
Pay is moving the other way. The U.S. Bureau of Labor Statistics said average hourly earnings rose 0.1% in September, to $37.81. They were up 3.0% over the past year. The annual rate was the slowest since May 2021.
Consumer stocks barely reacted on October 5. Off-price TJX Companies (NYSE:TJX | TJX Price Prediction) led with a 1.3% gain as trade-down bets firmed. Walmart (NASDAQ:WMT) gained 0.78%, while McDonald’s (NYSE:MCD) added 0.49% despite weak traffic, and Costco (NASDAQ:COST) edged up 0.31%.
Freight, Fuel and Tariffs Are Driving Costs Up
Steve Miller chairs the services survey. He said, “Tariffs and fuel cost impacts were the most cited issues impacting respondents’ supply chains.” A farm respondent reported, “High diesel fuel costs increased freight dramatically.”
Factories report the same pressure. The Institute for Supply Management’s manufacturing prices index reached 77.9, so this problem goes well beyond a single sector.
Those costs move down the chain. An importer whose container bill doubles raises the price of the goods inside it. Gasoline averaged $4.46 a gallon nationally in the week of September 28.
Wages Have Fallen Behind Prices
Consumer prices rose 3.4% through August. Prices are rising faster than hourly pay, so the average paycheck buys less than it did a year ago.
Heather Long works at Navy Federal Credit Union. She said “Inflation has eaten up all wage gains for the average worker since April”. Hiring is too weak to close that gap.
The U.S. Bureau of Labor Statistics reported only 29,000 jobs added in September, with unemployment at 4.2%. When employers stop competing for staff, workers lose power to push for raises.
Households Pay First, Profit Margins Pay Second
Households feel it first, and they respond by trading down to cheaper options. Walmart said its share gains were “led by upper-income households”. Costco’s traffic grew 3.3%, and TJX posted 4% comparable sales growth.
McDonald’s shows the other side of the squeeze. U.S. comparable sales grew just 0.8% last quarter, and management said July was “slightly negative”. The stock is down 22.26% year to date.
Freight and energy costs must ease, or wages must speed up. With hiring this weak, cooling costs is the more likely path, though that depends on fuel and tariff policy.
Miller commented on the index. He said it has “registered above 70 percent for the sixth time in seven months.” A drop below 70 would likely signal that cost pressure on businesses is easing.
Which Consumer Stocks Face the Most Margin Risk
The bull case is that total dollar spending keeps holding up. Retail sales reached $737.8 billion in August, up 1.1% from July.
The bear case is shrinking margins at companies whose customers are squeezed hardest. Restaurants are the most exposed group.
Large discount retailers are better positioned than restaurants. TJX at 25x earnings serves the shoppers who are trading down. McDonald’s at 19x looks cheap because of real problems, and that should hold until U.S. traffic recovers.
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Omor Ibne Ehsan is a writer at 24/7 Wall St. He is a self-taught investor with a focus on growth, cyclical, and dividend equities that have strong fundamentals, value, and long-term potential. He also has an interest in high-risk, high-reward investments such as penny stocks.
