The U.S. services sector expanded at a faster pace in September as the non-manufacturing index rose to 61.6 from 58.5 in August, 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 IFR Markets had expected a 58.1 level.
The prices paid index rose to 64.2 from 62.8, the 31st consecutive month prices were growing, the ISM said. The employment index grew to 62.4 from 56.7.
The business activity/production index gained to 65.2 from 60.7, the new orders index was at 61.6, up from 60.4; backlog of orders climbed to 58.5 from 56.5; new export orders increased to 61.0 from 60.5; inventories gained to 54.5 from 53.5; inventory sentiment remained at 59.5; the supplier deliveries index rose to 57.0 from 56.0; and imports rose to 55.0 from 52.0.
Members' general comments on business in the month included:
- “[Additional] logistics costs, both inbound and distribution, caused by increased governmental regulation, and a shortage of class-A drivers is leading to a significant increase in [the] cost of goods [sold].” (Accommodation & Food Services)
- “New residential construction market is still strong, with a good backlog of orders. Labor shortages and tariffs on materials continue to negatively weigh on earnings.” (Construction)
- “Economy continues to exhibit strength. New construction, both residential and commercial, abounds. Harvest [is] about over. Overall, results appear promising. Every day is a bit better than the last.” (Finance & Insurance)
- “Business activity has been slightly higher than normal, though pharmaceutical costs continue to put pressure on profitability.” (Health Care & Social Assistance)
- “Starting peak holiday season ramp-up, [with] heavy importing. Building inventories of finished goods, replacement parts and supplies. Outlook very positive for [the] holidays and 2019.” (Information)
- “Business generally remains strong, with new services being implemented.” (Management of Companies & Support Services)
- “Prices and supply have flattened, and tariff concerns have subsided for our business [at least for the duration of 2018]. Things seems to be stabilizing.” (Mining)
- “Overall positive outlook in the economy continues, but we are cautious due to limitations in available manpower.” (Professional, Scientific & Technical Services)
- “Business activity is up sharply due to the rush of purchase requests received prior to fiscal year 2018 funds expiring on September 30.” (Public Administration)
- “Our general state of business is strong, but there is a lot of uncertainty [about] the pending tariffs. This may cause a shift [in] production sites.” (Retail Trade)
- “Import tariffs on steel, plywood, and [other] lumber are inflating prices, which are difficult to pass along to the end user due to competitive pressures. Labor and trucking shortages are affecting the industry. Low finished goods inventory is inflating home prices and causing buyers to delay purchases.” (Wholesale Trade)
