The U.S. services sector grew strongly in April, according to today’s report from the Institute for Supply Management.

The ISM’s non-manufacturing index rose to 68.4 in April from 65.8 in March, above Wall Street estimates of a dip to 64.0.

A number above 50 indicates growth, while a figure below that threshold denotes contraction.

The ISM survey’s employment index rose in April, to 54.5 from 53.9, while demand for new orders grew, with that index increasing to 65.5 from 62.8.

The services sector includes everything from restaurants and hotels to banks and airlines.

Bay Street economists see inflation warning signs in today’s report.

“Like its manufacturing cousin, the ISM non-manufacturing index is pointing to a broad and robust expansion in U.S. economic activity,” says RBC Capital Markets. “The expansion, however, also seems to be underscored with mounting inflationary pressures — a factor which led the Federal Reserve to alter its statement on its accommodative monetary policy yesterday.”

BMO Nesbitt Burns notes rise employment component stayed above 50 for the seventh month in a row. “This bodes well for employment in the private services-producing sector, and Friday’s payroll report,” it says. “Historically, a 54.5 print on the employment index would be worth just under 200,000 service sector jobs, but, admittedly, history hasn’t been a foolproof guide of late on the jobs front.”

But BMO Nesbitt warns that inflation appears to be lurking as the prices paid index rose to 68.6 from 65.7. “Another strong broad economic indicator reeking with inflation pressure; smells like the Fed is in danger of falling behind the curve,” warns Nesbitt.

RBC agrees that “input costs may be a growing concern for service sector”, noting, “price increases are reported extensively across a majority of product groups”.