Service sector

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

Customers drink and dine inside “Martha” restaurant after showing proof of coronavirus disease (COVID-19) vaccination before entering, in Philadelphia, Pennsylvania, United States on August 7, 2021 REUTERS / Hannah Beier

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WASHINGTON, Dec. 3 (Reuters) – A measure of U.S. service sector activity unexpectedly rose in November, reaching a new record as companies boosted hiring, but there is no indication that supply constraints are easing and prices remain high.

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

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

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

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

The lengthening of delivery times partly explains 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 deliveries from suppliers also indicate relentless shortages linked to the pandemic.

The measure of prices paid by the survey’s service industries fell to a still high level of 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 companies stood at a record 69.7 last month.

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Reporting by Lucia Mutikani Editing by Chizu Nomiyama

Our Standards: Thomson Reuters Trust Principles.