There were more indications of inflationary pressures building in the U.S., with the release Monday of the Institute for Supply Management’s non-manufacturing index.

The index outpaced consensus expectations with a March reading of 65.8. Markets had been expecting about 62.3.

A reading above 50 indicates an expanding services sector and this has occurred for 11 consecutive months. Derek Holt, assistant chief economist for RBC Financial Group, noted this is the third-consecutive reading above 60 and readings above 60 have occurred for seven of the past nine months. March’s reading also comes in a full five points higher than in February.

Holt said in a report that among major sub-indices, new orders picked up steam over the previous month and is well into expansionary territory at 62.8. Employment also put in a stronger performance with a reading of 53.9. Even total non-manufacturing inventories moved into expansionary territory. The export sub-index slipped but remains in expansionary territory, while imports pushed farther ahead.

But he noted that the biggest jump occurred in the prices paid index, which climbed by 8.4 points to 65.7. “Forty-three per cent of respondents now indicate that they are paying higher prices for purchased materials and services. This is further evidence of a fanning out in pipeline inflationary pressures within the U.S. economy.”

Monday’s report follows the release last week of the ISN’s manufacturing index, which defied expectations by rising rather than falling. That was a sign U.S. factories were busier in March, faring better than market expectations, and more manufacturers say they are willing to add workers, a hopeful sign for payroll growth.

“These two reports taken together point to substantial signs of early inflationary pressures building within the U.S. economy,” Holt said. “When combined with last Friday’s evidence of a sharp turnaround in labour market conditions, the case for monetary tightening is getting stronger day by day.”

Sherry Cooper, chief economist for BMO Nesbitt Burns Inc. said that the ISM’s non-manufacturing index remains too new to bear close analysis of the components. But, she said, “suffice it to say they looked good this month as we see gains across the board. Employment’s reading rebounded in March, up 5.5 pts from a year ago.”

“A number here, a number there, and after a while you are looking at a steamy recovery,” Cooper said. “Fed officials are smiling. Bond owners are not, nor should they. Nor will they be smiling anytime soon.”