Two recent surveys paint a mixed picture of the US services sector for September. The data from the Institute for Supply Management (ISM) revealed a robust expansion in activity, surpassing expectations, while S&P Global indicated a deceleration in growth. The ISM's purchasing managers' index saw a notable increase, climbing to 54.9 in September from 51.5 in August.
Analysts had expected a reading of 51.7 based on a consensus gathered by Bloomberg. This reading represents the seventh instance this year where the index has pointed to expansion, a situation denoted by values above 50. The average for the last twelve months stands at 51.8. "The ISM services index surprised to the upside in September, acting as yet another indicator that the economy is still growing at a brisk pace," observed Matthew Martin, an economist at Oxford Economics, in comments sent to MT Newswires.
Martin added, "Consumer spending continues to rise at a strong pace, and is expected to remain well-supported this year and next as financial conditions loosen and homeowners start to utilize their accumulated equity." Significant increases were noted in business activity and new orders, which both rose by more than 6 percentage points, signaling expansion last month.
Steve Miller, chair of the ISM’s services business survey committee, acknowledged this growth but also highlighted the rising concerns about political uncertainty. "However, concerns over political uncertainty are more prevalent than last month," Miller noted. In September, twelve out of the surveyed services industries experienced growth, while five reported declines.
The index for new orders increased to 59.4 from 53 in August, and the business activity index rose to 59.9 from 53.3. Despite these gains, the employment component fell to 48.1 from 50.2 month-over-month, indicating a contraction in employment in the services sector. Moreover, the supplier deliveries index increased to 52.1 from 49.6, reflecting a slowdown in delivery performance.
Miller remarked, "Pricing of supplies remains an issue as supply chains continue to stabilize." On a separate note, S&P Global reported a decline in its services PMI gauge, which fell to 55.2 from 55.7 in August, slightly below the Bloomberg-polled consensus of 55.4. This latest figure is noted as one of the strongest readings in the past two and a half years.
Additionally, the S&P Global US composite PMI output index decreased to 54 from 54.6. Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, commented on the current financial landscape, stating, "Lower interest rates have been reported by survey contributors as having buoyed demand, particularly in financial services, which, alongside healthcare, remains a notably strong sector." However, Williamson pointed out that business confidence has waned due to uncertainties surrounding the impending presidential elections and rising recession fears..