Service sector grew in September despite shortages, weak job gains
Two more measures of economic activity released Tuesday showed expansion during the month of September. But growth was held back by the macro themes of the moment: continuing supply shortages and weak employment gains.
Driving the news: The Institute for Supply Management’s Services PMI Index (which measures all non-manufacturing activity) increased — barely — to 61.9 from 61.7 in August. Consensus expectations were for the index to decline to 60.
- And the IHS Markit U.S. Services PMI Business Activity Index registered 54.9 in September. Though it's down slightly from 55.1 in August, it's higher than an earlier flash estimate — and any reading above 50 is an increase from the previous month.
Why it matters: It’s another sign that the economy’s rebounding, albeit slowly, from the Delta lull of July and August.
What's happening: Supplier delivery times slowed at an even faster rate than they did in August, while inventories declined and order backlogs grew — all evidence of the persistent supply chain challenges.
- Employment grew, but at a slower pace than overall business activity.
What to watch: Logjams or not, a pickup in growth usually translates to an uptick in prices.
- The ISM prices index jumped 2.1 percentage points from August to a reading of 77.5, reversing its decline the prior month. All 18 sectors included in the report noted higher raw materials prices in September.
- ISM's Manufacturing PMI released last week showed a similar movement on costs. Separately, the August Personal Consumption Expenditure price index (the inflation measure most watched by the Federal Reserve) grew by more than expected.
Go deeper: Emerging from the Delta slowdown