U.S. service industries surge more than expected on Bloomberg orders


© Reuters.

(Bloomberg) – U.S. service industries grew more than expected in September, as faster growth in new orders and a pickup in employment signaled a better pace of economic recovery.

The Institute for Supply Management’s services index, which accounts for about 90% of the economy, climbed to 57.8 in the month from 56.9 in August, according to data released Monday. Readings above 50 indicate expansion, and September’s figure topped the median estimate of 56.2 in a Bloomberg survey of economists.

Improved orders and business activity are driving more service providers to increase their workforce. The numbers, coupled with an improvement in the group’s manufacturing gauge, suggest that the economic rebound is gradually broadening, even as activity remains below pre-pandemic levels in various industries.

“Respondent comments remain mostly optimistic about the business conditions and the economy, which are directly tied to the operating companies,” Anthony Nieves, chairman of the ISM Services Affairs Committee, said in a statement. “Capacity and logistics issues continue to arise as business volumes have increased.”

Sixteen service industries recorded growth in September, including entertainment and recreation, transportation, health care and real estate. Professional, scientific and technical services were the only industry to report a decline.

The ISM service employment measure jumped 3.9 points to 51.8, marking the first time since the start of the pandemic that the gauge has shown an expansion.

The ISM report does not detail actual month-to-month activity levels because the survey asks purchasing managers whether activity is increasing, decreasing, or stagnating.

A report released by the Labor Department on Friday showed job growth slowed in September, with employers adding 661,000 fewer jobs than expected. This figure was limited by a decline of 280,500 in state and local wages.

The ISM New Orders Index for service providers rose 4.7 points to 61.5. The measure of service-related trade activity, which matches the ISM’s factory production index, fell from 62.4 to 63, marking the fourth month of robust readings.

The group’s export tonnage rose at a slower pace in September, indicating cooler overseas demand. Inventories of service providers also fell for a second month.

© 2020 Bloomberg L.P.

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