Service sector

US services sector activity indicator hits record high in November – ISM survey

Customers drink and dine inside the ‘Martha’ restaurant after showing proof of their coronavirus disease (COVID-19) vaccinations before entering, in Philadelphia, Pennsylvania, U.S. August 7, 2021 REUTERS/Hannah Beier

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WASHINGTON, Dec 3 (Reuters) – A measure of U.S. service industry activity unexpectedly rose in November, hitting a new record high as businesses boosted hiring, but there were few signs supply constraints eased and prices remained high.

The Institute for Supply Management said Friday its non-manufacturing activity index rose to 69.1 last month, the highest reading since the series began in 1997, from 66.7 in October. 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 expected the index to fall to 65. The survey added to data on consumer spending, the labor market and manufacturing by painting a strong picture for the economy. The Omicron variant of COVID-19, however, poses a risk to the outlook.

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The ISM’s measure of employment in the service industry hit a seven-month high of 56.5 from 51.6 in October. That raised hopes that a pandemic-related labor shortage, which has hampered faster job growth, could begin to ease. There were 10.4 million job openings at the end of September.

With rising employment levels, service industries made progress in reducing the backlog of unfinished work last month.

Overall, supply constraints remained binding. The survey’s measure of supplier deliveries remained unchanged at a high of 75.6. A reading above 50% indicates slower deliveries.

Longer delivery times partly explain the surprise increase in the services index. They are normally associated with a strong economy and increased customer demand, which would be a positive contribution to the ISM non-manufacturing index.

In this case, however, slower supplier deliveries also point to relentless pandemic-related shortages.

The survey measure of prices paid by service industries fell to a still-high 82.3 from 82.9 in October. Federal Reserve Chairman Jerome Powell told lawmakers on Tuesday that “the risk of higher inflation has increased.”

A measure of new orders received by service businesses stood at a record 69.7 last month.

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Reporting by Lucia Mutikani Editing by Chizu Nomiyama

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