Service Sector Expands at Fastest Pace in 4 Months
Economic activity in the services sector rose in August for the 27th month in a row, and at the fastest pace in four months, the Institute for Supply Management, Tempe, Ariz., reported Tuesday.
The ISM Services PMI came in at 56.9 percent, 0.2 percent higher than July. The Business Activity Index registered 60.9 percent, an increase of 1 percentage point 59.9 percent in July. The New Orders Index rose to 61.8 percent, 1.9 percentage points higher than July (59.9 percent). The Supplier Deliveries Index registered 54.5 percent, 3.3 percentage points lower than 57.8 percent in July.
“Despite an improvement in inventory levels, services businesses still continue to struggle to replenish their stocks,” said Anthony Nieves, Chair of the ISM Services Business Survey Committee: “Fourteen industries reported growth. The composite index indicated growth for the 27th consecutive month after a two-month contraction in April and May 2020. Growth continues — at a slightly faster rate — for the services sector, which has expanded for all but two of the last 151 months. The services sector had a slight uptick in growth for the month of August due to increases in business activity, new orders and employment. Based on comments from Business Survey Committee respondents, there are some supply chain, logistics and cost improvements; however, material shortages remain a challenge. Employment improved slightly despite a restricted labor market.”
“The underlying details point to services resilience with business activity and new orders notching their highest reading this year,” said Tim Quinlan, Senior Economist with Wells Fargo Economics, Charlotte, N.C. “Supply challenges are easing, but hiring remains a challenge for employers.”
Quinlan noted most of the underlying components of the survey moved in the right direction and the headline index was buoyed by a pickup in business activity and new orders. “Among many crosscurrents in the economy at present, the outlook for services spending is an important one and the latest data suggest continued expansion in the sector. Consumer demand looks to be resilient despite high inflation and rising interest rates. It’s not a lack of demand, but still strained supply that remains the biggest issue.”
