U.S. Services Sector Slows in September as New Orders Drop
WASHINGTON, Oct 4 (Reuters) – The U.S. services sector slowed in September as new orders fell to a nine-month low, according to a survey from the Institute for Supply Management (ISM). Despite the decrease, the pace of growth in the sector remained on track with expectations for solid economic growth in the third quarter.
The ISM’s non-manufacturing Purchasing Managers’ Index (PMI) slipped to 53.6 last month from 54.5 in August. A reading above 50 indicates growth in the services industry, which makes up more than two-thirds of the economy. Although the PMI was in line with economists’ expectations, it did mark a decline from the previous month.
The survey also revealed that the measure of new orders received by services businesses dropped to 51.8, the lowest level since December. However, order backlogs improved and exports increased. This suggests that while new orders may have slowed, there is still underlying strength in the sector.
Despite the slowdown in new orders, services businesses continue to face higher prices. Twelve services industries reported an increase in prices paid, including utilities, retail, and wholesale trade. This reflects ongoing inflationary pressures in the economy.
The employment situation in the services sector also showed some signs of slowing, with the ISM’s gauge of services sector employment dipping to 53.4 from 54.7 in August. This decline can largely be attributed to supply issues and difficulties filling vacant positions.
The ADP National Employment Report, released separately, showed private payrolls rising by only 89,000 jobs in September, the smallest count since January 2021. This figure was below economists’ expectations and highlights a potential slowdown in the labor market.
However, economists caution against reading too much into the ADP report, as it has not been a reliable predictor of the more comprehensive employment report released by the Labor Department’s Bureau of Labor Statistics. The government’s report is scheduled for release on Friday.
Overall, while the U.S. services sector did experience a slowdown in September, the data still suggests that the economy is on track for solid growth in the third quarter. The Federal Reserve’s resolute messaging on interest rates and the economy’s resilience could mean that monetary policy will remain tight for the foreseeable future.