Service sector

Services sector activity in the United States increased slightly in September; shortages persist – ISM survey

A trader wearing a protective mask walks, as the global outbreak of the coronavirus disease (COVID-19) continues, at the New York Stock Exchange (NYSE) in the financial district of New York, United States, 19 November 2020. REUTERS/ Shannon Stapleton

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WASHINGTON, Oct 5 (Reuters) – U.S. service sector activity rose in September, but growth is being held back by a continued shortage of inputs and resulting high prices as the pandemic drags on.

The Institute for Supply Management said on Tuesday its non-manufacturing activity index rose slightly to 61.9 last month from 61.7 in August. A value above 50 indicates growth in the service sector, which accounts for more than two-thirds of US economic activity.

Economists polled by Reuters had forecast the index to fall to 60. A resurgence in COVID-19 infections, driven by the Delta variant, has delayed an expected recovery in demand for services such as travel and other indoor activities. strong contact.

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Spending is gradually shifting from goods to services as the economy normalizes after being severely disrupted by the pandemic, thanks to coronavirus vaccinations. The survey’s measure of new orders received by service businesses rose slightly to 63.5 last month from 63.2 in August.

Like other segments of the economy, the service sector is struggling with shortages of raw materials and labour. There are few signs that these headwinds will soon recede.

The ISM survey’s measure of supplier shipments fell to 68.8 last month from 69.6 in August. A reading above 50 indicates slower deliveries. With supply still tight, prices remained high. A measure of prices paid by service industries rose to 77.5 from 75.4 in August.

This mirrored findings from the ISM manufacturing survey released last week on Friday and suggested high inflation could persist through the end of the year. Last month, the Federal Reserve raised its projection of its key measure of inflation to 3.7% this year. This was up from the 3.0% projected in June.

The personal consumption expenditure price index, excluding the volatile components of food and energy, rose 3.6% year-on-year in August, well above the flexible inflation target of 2% from the US central bank. Read more

There has been a steady buildup of unfinished work in service industries over the past month. Businesses continued to hire more workers, although the pace slowed somewhat from August. This probably reflects the difficulties in finding workers.

The economy is experiencing a severe labor shortage as the pandemic has forced some people to give up their jobs to become caregivers. Others are reluctant to return for fear of contracting the virus, while some have retired or are looking to change careers.

There were a record 10.9 million job openings at the end of July. The ISM survey’s service industry employment measure fell to 53.0 last month from 53.7 in August.

Economists are cautiously optimistic that labor shortages will begin to ease in the fall and winter after federally funded unemployment benefits expire in September, which businesses and Republicans have blamed it on the shortage of workers.

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Reporting by Lucia Mutikani Editing by Chizu Nomiyama

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