The U.S. service industry. found a slow start to growth in September, while the employment sector surged and a measure of prices paid by businesses for inputs fell to more than a 1-1/2-year low, pointing to underlying strength in the economy even with rising interest rates.
The Institute for Supply Management (ISM) reported earlier that the non-manufacturing PMI slipped to a reading of 56.7 last month from a reading of 56.9 in August. Economists polled by Reuters had forecast the non-manufacturing PMI to fall to 56.0.
Nevertheless, readings above 50 still indicate expansion in the services sector, which accounts for more than two-thirds of US economic activity. The economy is slowing as the Federal Reserve aggressively tightens monetary policy to tame inflation.
U.S. central bank has raised its policy rate from near zero at the beginning of the year to the current range of 3.00% to 3.25%, and last month marked an even bigger increase. Higher borrowing costs have weighed on the housing market and are starting to weigh on the manufacturing industry. The ISM reported on Monday that its manufacturing PMI fell in September to the lowest reading since May 2020.
Services activity was supported by a shift in spending away from goods, although demand for services started to slow. The ISM measure of new orders received by service businesses slipped to 60.6 from 61.8 in August. Businesses, however, reported an increase in exports.
The service industry employment indicator increased to 53.0 from a reading of 50.2 in August. The jump suggested that demand for labor remained strong, even as job openings fell in August by the most in nearly 2-1/2 years. The government reported on Tuesday that there were 10.1 million job openings in August, down from 11.2 million in July.
The ISM survey measure of supplier shipments fell to 53.9 from 54.5 in August. As the supply chain continues to improve and employment increases, the backlog is further reduced. This caused service inflation to drop significantly last month.
The US dollar index, which measures the greenback against six major currencies, traded up 1.13% to 111,420.
