The US service sector has been growing for 95 consecutive months, and is a main driver of the US economy, but after two months of record growth it seemed poised for a slowdown
Washington (AFP) - Growth in the key US services sector slowed from the blistering pace of recent months, falling back closer to the average for the past year, according to a survey released Tuesday.
The sector has been growing for 95 consecutive months, and is a main driver of the US economy, but after two months of record growth it seemed poised for a slowdown.
The Institute for Supply Management’s monthly non-manufacturing index slipped nearly three points in November to 57.4, which is only four-tenths above the 12-month average. But it was well below the analysts’ consensus forecast of 59.3.
A single industry – agriculture, forestry and fishing & hunting – reported a contraction last month, with the other 16 reporting growth, the ISM report said.
Anthony Nieves, chair of ISM’s Non-Manufacturing Business Survey Committee, said he felt the record pace of the prior two months would be “tough to sustain” especially after the buildup for the holiday season “and would have to wane a little bit.”
But despite the “cooling off” in the index, responses from industry still indicate they expect to finish the year strong, and carry that momentum into 2018, he said.
Nearly all the components of the services index declined, including a four-point drop in new orders and a two-point drop in employment.
Nieves said companies continue to report difficulty filling open positions, especially in skilled labor.
Economists said the index confirms the service sector is doing well, as is the manufacturing sector, especially after the impact of two summer hurricanes has dropped out of the calculations.
“Businesses are doing quite well. Activity is strong, profits are solid and optimism is high,” economist Joel Naroff said in a research note.
But he added this jab at the massive tax cut plan, which is nearing completion in Congress:
“Clearly, if we do not cut taxes right away, we are going to fall right into a recession. Okay, I am a cynic.”
He argued that the tax bills which have driven stock markets to repeated records and are welcomed by many corporate leaders “do little for efficiency and lots for big company stock prices,” and could accelerate inflation given the labor shortages.