Service Industries Index at 12-Year High Following Storms

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America’s service industries expanded in September at the fastest clip in 12 years, signaling vibrancy across the bulk of the economy following two major hurricanes, a survey from the Institute for Supply Management showed Oct. 4.

Highlights of ISM Non-Manufacturing

• Non-manufacturing index jumped to 59.8 (estimated 55.5), the highest since August 2005, from 55.3; readings above 50 indicate growth.

• Measure of new orders advanced to a five-month high of 63, from 57.1.

• Employment index rose to 56.8, the strongest since May, from 56.2.



• Gauge of prices paid for materials and services surged to 66.3, the highest since February 2012, from 57.9.

Key Takeaways

Combined with the fastest pace of manufacturing growth since May 2004, as reported by the Tempe, Arizona-based ISM earlier this week, the report on services shows the economy is snapping back from any hurricane-related setback.

The biggest one-month advance in the group’s orders index in a year, rising backlogs and healthier business activity may be partly explained by recovery efforts and robust demand in the aftermaths of hurricanes Harvey and Irma. At the same time, the Federal Reserve and most economists expect the storms to have little long-term impact on the broader economy.

As was the case for factories, delivery times for non- manufacturing businesses lengthened and were the slowest since Hurricane Katrina in 2005 as the energy-intensive Gulf Coast of Texas took time to get back on its feet. The surge in demand helps explain the jump in prices for supplies last month.

Still, a gauge of export demand also perked up to a four-month high in September, indicating global markets are recovering and fueling sales at American companies.

The industries in the ISM’s non-manufacturing index account for about 90% of the economy and include sectors such as utilities, retailing, health care, and construction.

Other Details

• Index of business activity, which parallels the ISM’s factory production index, climbed to a five-month high of 61.3 from 57.5.

• Gauge of order backlogs rose to 56 from 53.5; export orders measure advanced to 56 from 55.

• Supplier deliveries gauge jumped to 58 from 50.5, marking the largest single-month advance since August 1997, when the survey of service industry purchasing managers was in its infancy.

• The 8.4-point increase in the ISM prices-paid gauge was the largest since October 2010.

With assistance by Alexandre Tanzi