The Bull

Monday 22

October, 2018 4:44 PM



US service sector growth hits all-time high in September

US service sector growth hits all-time high in September

The dominant US services sector saw growth surge in September, shrugging off concerns about trade disputes to reach a record rate of expansion, according to an industry survey Wednesday.

Share |

04.10.2018 05:08 PM

The dominant US services sector saw growth surge in September, shrugging off concerns about trade disputes to reach a record rate of expansion, according to an industry survey Wednesday.

The Institute for Supply Management said its monthly survey showed the non-manufacturing index jumped to 61.6 percent, a 3.1 point gain from August, far outstripping expectations and well above the average for the past 12 months.

While surprising, the pace of orders for the sector shows there is unlikely to be a slowdown anytime soon, Anthony Nieves, chair of ISM's survey committee for the non-manufacturing sector, told reporters.

"I thought we might slowdown and move a little sideways from last month," Nieves said. But "all indications are we will continue to see growth in this sector."

He highlighted the business activity index, which jumped 4.5 points to 65.2 percent, the highest reading in nearly 15 years.

Any reading above 50 percent indicates growth, but the higher the number the faster the rate.

New orders increased 1.2 points overall, with 17 of 18 industries reporting increases and none showing a decline, demonstrating "we still have things in the pipeline," Nieves said.

And despite months of concerns by firms that were struggling to find enough workers to fill open positions, employment also surged 5.7 points, to the highest level since 1997.

Too good to be true?

Meanwhile, while many companies continue to complain about rising prices for some goods, due to lack of workers and tariffs, price increases have been mild.

Businesses have been unnerved by President Donald Trump's confrontational trade policy and high tariffs on goods from key trading partners, and Nieves said companies reported accelerating exports and imports ahead of anticipated tariffs. 

That may have boosted some of the figures, as did a flurry of orders from government agencies ahead of the end of the fiscal year on September 30.

But with an agreement this week on revising the free trade deal with Canada and Mexico ending one source of uncertainty, "now the focus is on China," he said.

Trump has imposed steep tariffs on half of all goods imported from China, on top of duties on steel and aluminum imports from most countries, including Canada and Mexico. But there have been no further discussions to try to resolve a bitter dispute with Beijing.

Still Nieves said high consumer confidence, commercial confidence and the feeling "this administration is more corporate friendly" have helped buoy the sector.

Ian Shepherdson, chief economist at Pantheon Macroeconomics, was skeptical the strong growth would last.

"Too good to be true for long," he said in a research note. "Whatever drove the index this time, the September level can't be sustained, and we expect a clear correction over the next couple months." 

"The non-manufacturing economy is strong, feeding off the fiscal sugar rush, but it's not this strong."
Archive
Markets
Index: Points Change Percent

PLEASE SUPPORT OUR SPONSORS, AUSTRALIA'S LEADING BROKERS:



© Copyright TheBull.com.au. All rights reserved.