U.S. Services Gauge Rises to Record as Activity, Employment Firm
(Bloomberg) -- U.S. service providers expanded at a record pace in November as steadfast consumer demand drove a further strengthening in business activity and kept orders firm.
The Institute for Supply Management’s services index advanced to 69.1 last month from 66.7 in October, data showed Friday. Readings above 50 signal growth, and the November print exceeded all forecasts in a Bloomberg survey of economists.
Bolstered by rapid wage gains and a stockpile of savings, Americans have the desire and the wherewithal to spend on services. ISM’s gauge of business activity advanced to a fresh record as the new orders index held at a record high in data back to 1997.
All 18 services industries reported growth last month, led by real estate, transportation and warehousing, and retail trade.
“Demand continues to outpace supply that has been impacted by capacity constraints, shortages of labor and materials, and logistical challenges,” Anthony Nieves, chair of the ISM services business survey committee, said in a statement. “This has also caused demand-pull inflation that is affecting overall business conditions.”
While these demand-based gauges continued to show faster growth, other measures hinted supply constraints may be starting to ease. A measure of order backlogs retreated from a record high, and the employment index climbed nearly 5 points to 56.5, its strongest reading since April.
Similar developments emerged earlier in the week with the ISM’s manufacturing survey. Sustained relief from capacity constraints across all industries could help to cool still-rampant inflation pressures.
Select ISM Industry Comments
“Business is greater than in the past. Supply chain issues persist, but we’re evolving to overcome or manage them better than in the past.” - Agriculture, Forestry, Fishing & Hunting
“Construction material shortages and longer lead times continue to hamper operations. Significant cost increases from labor and freight are forecast for the start of next year.” - Construction
“Seeing inflationary forces in the marketplace, which is resulting in suppliers raising their prices moving into 2022.” - Finance & Insurance
“Continued inflationary pressures driven by the cost of fuel, shipping capacity constraints, and imbalances in supply and demand are impacting a broad spectrum of products.” - Management of Companies
“The Covid-19 surge, inventory shortages, driver and maintenance worker shortages, and long lead times for materials are straining our system.” - Transportation & Warehousing
“Inflation and supply chain issues have caused cost increases and stockouts, but sales continue to be strong, with a positive outlook for the next quarter and beyond.” - Wholesale Trade
The ISM’s measure of prices paid by service providers edged down in November to 82.3 from the highest level since September 2005.
Still, the group’s index of supplier delivery times held at the second-highest on record, indicating delays are still well-extended.
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