U.S. Service Industries Grow Near Record, Topping Forecasts
(Bloomberg) -- A gauge of U.S. service industries unexpectedly rose to a near-record level in September, an Institute for Supply Management survey showed Wednesday, offering fresh evidence of strength in the biggest part of the economy.
Highlights of ISM Non-Manufacturing (September)
The reading topped all estimates in Bloomberg’s survey of economists, underscoring continued strength at service companies amid solid consumer demand underpinned by tax cuts and plentiful jobs. While ISM’s headline non-factory index dates to 2008, unofficial calculations based on earlier readings of components show the index is the highest since reaching 62 in August 1997.
The increase was broad-based, with gains across all four components: business activity, new orders, employment and supplier deliveries. The backlog index rose, showing that companies are still struggling to keep pace with orders.
The record employment reading is a positive signal before the official U.S. jobs report Friday. American businesses added 230,000 workers in September, the most in seven months, data released Wednesday by the ADP Research Institute showed, and economists predict nonfarm payrolls rose posted another solid gain in the month.
“We just keep building,” Anthony Nieves, chairman of the ISM’s non-manufacturing business survey committee, said on a conference call. “How sustainable is this? All indications are that we’re not going to see a strong pullback.”
What Our Economists SayThe unexpected rise in the non-manufacturing ISM index in September is a sign that the service sector is poised to bolster growth in the third quarter. The strength in measures of demand and employment point to additional momentum entering the final quarter. The index is an early read on conditions in the economy’s largest sector. Should September’s strength be confirmed by data in the weeks ahead, it is possible that a couple of the FOMC’s remaining holdouts come on board for a December hike.
-- Tim Mahedy and Carl Riccadonna, Bloomberg Economics
Read more for the full reaction note.
- Gauge of new orders advanced to 61.6 from 60.4
- Measure of export orders rose to a five-month high of 61 while import gauge increased to 55, matching highest since early 2017
- Gauge of supplier deliveries advanced to 57 and prices paid rose to 64.2, both at four-month high
(Updates to add chart, ISM comment in Official’s View section.)
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