U.S. Services Index Unexpectedly Indicates Slightly Faster Growth In August
Service sector activity in the U.S. unexpectedly grew at a
slightly faster rate in the month of August, according to a report
released by the Institute for Supply Management on Tuesday.
The ISM said its services PMI inched up to 56.9 in August from
56.7 in July, with a reading above 50 indicating growth in the
sector. The uptick surprised economists, who had expected the index
to dip to 55.1.
"The services sector had a slight uptick in growth for the month
of August due to increases in business activity, new orders and
employment," said Anthony Nieves, Chair of the ISM Services
Business Survey Committee.
He added, "Based on comments from Business Survey Committee
respondents, there are some supply chain, logistics and cost
improvements; however, material shortages remain a challenge."
The modest increase by the headline index came as the business
activity index rose to 60.9 in August from 59.9 in July, while the
new orders index climbed to 50.2 in August from 49.1 in July.
The employment index also increased to 50.2 in August from 49.1
in July, indicating a slight increase in employment following two
months of contraction.
The ISM said the inventories index also advanced to 46.2 in
August from 45.0 in July, although a reading below 50 indicates the
third straight month of contraction.
"Despite an improvement in inventory levels, services businesses
still continue to struggle to replenish their stocks," Nieves
Meanwhile, the report showed the prices index decreased for the
fourth consecutive month, edging to 71.5 in August from 72.3 in
"Services will face significant growth challenges in the coming
months, though we expect the sector will persevere," said Oren
Klachkin, Lead U.S. Economist at Oxford Economics. "We believe
there is enough activity in the pipeline to propel growth in the
near term in spite of elevated inflation, higher interest rates,
and nagging supply-side problems."
He added, "Risks of a stall are greater in 2023, when the
pipeline will be less full as consumer spending tailwinds weaken
while prices remain high, supply chain challenges continue to drag
on activity, and financial conditions will provide less of a fillip
The ISM released a separate report last Thursday showing its
reading on U.S. manufacturing activity remained at a two-year low
The ISM said its manufacturing PMI came in at 52.8 in August,
unchanged from July. Economists had expected the index to edge down
While a reading above 50 still indicates growth in the
manufacturing sector, the index remained at its lowest level since
hitting 52.4 in June 2020.
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