The U.S. services sector expanded in August as the non-manufacturing business activity composite index was 55.3 in the month, compared to 53.9 in July, on a seasonally adjusted basis, the Institute for Supply Management reported Wednesday.

An index reading below 50 signals a slowing economy, while a level above 50 suggests expansion.

Economists polled by Thomson Reuters had expected a 56.0 level.

The prices paid index rose to 57.9 from 55.7. The employment index gained to 56.2 from 53.6.

The business activity/production index grew to 57.5 from 55.9, the new orders index was at 57.1, up from 55.1; backlog of orders climbed to 53.5 from 52.0; new export orders increased to 55.0 from 53.0; inventories fell to 53.5 from 56.5; inventory sentiment dropped to 61.0 from 67.5; the supplier deliveries index decreased to 50.5 from 51.0; and imports slid to 50.5 from 51.5.

Members' general comments on business in the month included:

  • “Milk prices have been low and are below break-even cost on many struggling farms. Twelve dairy farms have terminated dairy operations in the past year. Cattle prices are significantly lower than last year. The depressed agricultural economy has resulted in lower demand and less sales volume.” (Agriculture, Forestry, Fishing & Hunting)
  • “Impressive numbers month-over-month, 8 percent more projects and 4 percent higher revenues.” (Construction)
  • “Economy is chugging along. Decent crop yields seem to be offsetting poor commodity prices to some extent. Construction abounds.” (Finance & Insurance)
  • “Volumes remain about the same. Actual revenue has decreased due to price compression.” (Health Care & Social Assistance)
  • “Flat, stable pricing in the oil and gas sector currently has led to a flattening of supply chain activities.” (Mining)
  • “The overall animal protein market is stable, except for pork bellies and bacon. A major shortage of raw material has caused prices to spike, with every restaurant and hotel using bacon or pork bellies on their menu. The demand has outstripped supply. This will continue for the next 3 ‒ 6 months. Eggs are at an all-time historical low and [there is] an overabundance of supply.” (Accommodation & Food Services)
  • “Still optimistic conditions and attitudes about [the] economy, job and wage growth.” (Professional, Scientific & Technical Services)
  • “Seasonally slow period. Preparations for busy quarter well under way.” (Retail Trade)
  • “General slight increase in activity. Some stocking up in the market in anticipation of increased sales in the fall months and to cover for recent inventory shortfalls.” (Wholesale Trade)

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