WASHINGTON (Reuters) - U.S. business activity held steady in March, but prices increased across the board, suggesting that inflation could remain elevated after picking up at the start of the year.

S&P Global said on Thursday that its flash U.S. Composite PMI Output Index, which tracks the manufacturing and services sectors, dipped to 52.2 this month from 52.5 in February. A reading above 50 indicates expansion in the private sector.

The modest slowdown reflected a further cooling in services sector activity. Manufacturing climbed to a 21-month high. The survey suggested that the economy ended the first quarter on solid ground, though the pace of growth probably slowed from the October-December quarter's 3.2% annualized rate.

The United States continues to outperform its global peers, despite 525 basis points worth of interest rate hikes from the Federal Reserve since March 2022 to quell inflation.

The U.S. central bank on Wednesday left its policy rate unchanged at the current 5.25%-5.50% range, but policymakers indicated they still expected to reduce it by three-quarters of a percentage point by the end of this year.

The S&P Global survey's measure of new orders received by private businesses slipped to 52.1 from 52.3 in February. Its measure of prices paid for inputs increased to a six-month high of 58.9 from 55.5 in February. The output prices gauge rose to 56.8, the highest reading since April 2023, from 54.1 in February. Much of the price increases were in services.

With goods disinflation likely drawing to an end, the increase in services prices will need to slow considerably to keep overall inflation on a downward trajectory.

This month's increase in both input and output prices hinted at further rises in inflation in the coming months. Consumer prices have risen strongly in the first two months of 2024.

"Costs have increased on the back of further wage growth and rising fuel prices, pushing overall selling price inflation for goods and services up to its highest for nearly a year," said Chris Williamson, chief business economist at S&P Global Market Intelligence. "The steep jump in prices from the recent low seen in January hints at unwelcome upward pressure on consumer prices in the coming months."

Manufacturing expanded further, with the survey's flash manufacturing PMI edging up to 52.5 this month, the highest reading since June 2022, from 52.2 in February.

Growth in new orders slowed, but employment increased and supply chains improved further. Input prices rose. S&P Global said "anecdotal evidence suggested that inventories had been built to a level sufficient to support current workloads."

The survey's flash services sector PMI slipped to 51.7 in March from 52.3 in the prior month. The prices paid and input prices sub-components both rose, while employment was unchanged.