U.S. Service Industry Expansion Cools From Month-Earlier Record
(Bloomberg) -- U.S. service providers expanded at a robust pace in August, though a step slower than the record rate seen a month earlier as a gauge of business activity moderated.
The Institute for Supply Management’s services index fell to 61.7 last month from 64.1 in July. Readings above 50 indicate expansion.
The figures suggest that concerns about the highly contagious delta variant are cooling demand for some services like dining out, leisure and travel. The ISM gauge of business activity, which parallels the group’s factory production measure, fell to six-month low of 60.1.
Service providers are also facing many of the same supply and labor constraints as manufacturers. Inventories contracted further in August, falling to the lowest level in a year, while a measure of services employment eased slightly.
“The tight labor market, materials shortages, inflation and logistics issues continue to cause capacity constraints,” Anthony Nieves, chair of the ISM services business survey committee, said in a statement.
Figures earlier from the Labor Department showed hiring downshifted abruptly in August with the smallest jobs gain in seven months. Employment in leisure and hospitality, which has posted strong gains recently, was flat amid the spreading delta variant and persistent hiring challenges.
The report did, however, offer some indication that the recent build-up in inflationary pressures is moderating. The ISM’s prices paid index fell to the lowest since March after hitting an almost 16-year high in July. Meantime, supplier delivery times and order backlogs indexes eased.
“Supply chain disruptions -- including manufacturing-labor shortages, logistics delays and lack of material to make products -- are significantly disrupting our business.” - Accommodation & Food Services
“Material and labor shortages continue to hinder productivity. Price increases are ever-present and repetitive.” - Construction
“Supplies are tight in technology hardware.” - Information
“Temporary labor continues to be in short supply. Transportation costs are inflating prices on all products.” - Management of Companies
“A limited supply of critical items has caused us to expand our line of products and our supplier base.” - Retail Trade
“Steel shortages continue. Labor constraints at suppliers continue to push delivery dates out. Logistics issues (are also ongoing), as container space, truck drivers and the like remain difficult to obtain.” - Wholesale Trade
The report follows the ISM’s report on factory activity, which showed manufacturing expanded at a stronger-than-expected pace in August, reflecting faster orders and production growth as well as rising backlogs consistent with global supply chain challenges.
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