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Growth at U.S. service industries in August comfortably topped expectations on the sharpest monthly rebound in business activity since early 2008, favorable figures that were tempered by a slowdown in hiring.
The non-manufacturing index advanced to a three-month high of 56.4, exceeding the most optimistic forecast in a Bloomberg survey of economists, Institute for Supply Management data showed Sept. 5. That compares with the prior month’s reading of 53.7 that was the weakest since August 2016, and the median estimate of economists for a slight increase to 54.
The report may help mitigate near-term recession concerns brought on by contraction in manufacturing as producers wrestle with poor global demand and an escalating trade war. With the August rebound, the gauge of service industries that make up about 90% of the economy is in line with its six-month average.
The ISM’s index of business activity among non-manufacturers, which parallels the group’s measure of factory production, increased to 61.5 in August from 53.1, the largest single-month advance since February 2008. Indexes higher than 50 indicate expansion. A measure of new orders climbed to a six-month high of 60.3.
At the same time, the steady slowdown in business activity and orders since their highs in February may just now be filtering through into labor demand. The ISM’s gauge of services employment tumbled 3.1 points in August to 53.1, the lowest reading since March 2017, following a three-year low in ISM’s employment index for manufacturers.