Tuesday, October 5, 2021 07:24 AM
  • ISM gauge advances slightly to 61.9 in September from 61.7
  • Measures of business activity, backlogs, prices rise

U.S. service providers expanded at a faster-than-expected pace in September, supported by a pickup in business activity and durable growth in new orders.

The Institute for Supply Management’s non-manufacturing index edged up to 61.9 last month from 61.7 in August, data showed Tuesday. The median forecast in a Bloomberg survey of economists called for the measure to fall to 59.9. Readings above 50 signal growth.

The report suggests concerns about the delta variant — though still present — are abating some as Americans feel more confident spending money on services like dining out and travel. The ISM gauge of business activity among non-manufacturers, which parallels the group’s factory production measure, rose to 62.3 from a six-month low.

Meantime, difficulty hiring and ongoing logistics challenges have left inventories depleted. A gauge of inventories dropped to its lowest level in more than a year last month and order backlogs grew.

While the improvement in September “continued the current period of strong growth for the services sector,” Anthony Nieves, chair of the ISM services business survey committee, also said in a statement that “ongoing challenges with labor resources, logistics and materials are affecting the continuity of supply.”

WATCH: ISM Services Business Committee Chair Anthony Nieves says the organization’s services gauge reflects strong economic growth.

Seventeen of 18 services industries reported growth last month, led by retail trade, entertainment, and management and support of companies.

ISM’s measure of services employment showed hiring expanded at a slightly slower pace in September. The government’s jobs report, out Friday, is expected to show total payrolls rose by almost 490,000 in the month. The August report disappointed expectations as hiring at leisure and hospitality providers flatlined.

The ISM new orders gauge was little changed at 63.5 and the group’s gauge of prices paid by U.S. service providers marched higher.

Select ISM Industry Comments

“Transportation bottlenecks are increasing, resulting in longer lead times and missed appointments.” – Accommodation & Food Services

“Constraints on logistics from a cost and availability standpoint continue to be an issue.” – Construction

“Retaining clinical and temporary staffing is critical at this time.” – Health Care

“Both domestic and international logistics are increasing lead times about six weeks for ocean freight and two weeks for domestic freight.” – Management of Companies & Support Services

“Still experiencing very strong demand. Supply chain is still a challenge.” – Retail Trade

“Continued constrained supply of many key product groups. Also, inflationary pressures in most areas of the business keep driving costs higher.” Wholesale Trade

The report, which covers the industries that make up almost 90% of the economy, follows data out last week that showed manufacturers continue to struggle with many of the same supply constraints as service providers.