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U.S. Services Sector Expansion Eases in August — ISM

By Xavier Fontdegloria

 

U.S. services sector activity expanded for a third straight month in August, but the pace of growth eased, suggesting it struggles with still high Covid-19 infection numbers as it is more exposed to social distancing than the manufacturing industry.

The ISM Services Report on Business PMI for August fell to 56.9 from the July reading of 58.1. Economists polled by The Wall Street Journal expected the services PMI to be at 57.0.

August's reading is over the 50 point break-even point that separates expansion over contraction in activity, but signals a slowdown in the strong growth pace showed during both June and July.

"Respondents' comments are mostly optimistic and industry specific about business conditions and the economy as businesses are starting to reopen," said Anthony Nieves, chair of the ISM Services Business Survey Committee.

Industries that have not reopened remain concerned about uncertainty, he said.

Contrary to the services sector, the ISM Manufacturing Report for August released earlier this week showed U.S. factory output picking up further in August compared with July, reaching its fastest levels since November 2018.

In August, the ISM services business activity index slowed to 62.4 from July's 67.2. The new orders index fell sharply to 56.8 from 67.7 the prior month.

The employment index improved in August to 47.9, but remained in contraction territory for the sixth month in a row.

The supplier deliveries index climbed to 60.5, up 5.3 points from July's reading of 55.2, indicating slower deliveries as the economy improves and customer demand increases.

"There is a challenge with capacity and logistics due to the pandemic and the impact on deliveries and order fulfillment," Mr. Nieves said.

Among the 15 services industries reporting growth in August, there are arts, entertainment and recreation; health care and social assistance; and utilities. The three industries reporting a decrease in activity are mining, information and other services.

August's services PMI also signalled that the U.S. overall economic activity is growing, as a reading above 48.5 over time generally indicates an expansion of the overall economy. This is the third straight month in which the PMI indicates such expansion.

 

Write to Xavier Fontdegloria at xavier.fontdegloria@wsj.com

 

(END) Dow Jones Newswires

September 03, 2020 10:34 ET (14:34 GMT)

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