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US service sector cools in October
[WASHINGTON] US services industry activity slowed in October, with growth in new orders and employment moderating, likely reflecting concerns about ebbing fiscal stimulus and a resurgence in new Covid-19 cases across the nation.
The Institute for Supply Management (ISM) said on Wednesday its non-manufacturing activity index fell to a reading of 56.6 last month from 57.8 in September. That pulled the index back below its 57.3 level in February.
A reading above 50 indicates growth in the services sector, which accounts for more than two-thirds of US economic activity. Economists polled by Reuters had forecast the index dipping to 57.5 in October.
The services industry is being constrained by a shift in spending towards goods as the raging coronavirus pandemic keeps Americans at home, boosting the manufacturing sector. The ISM reported on Monday that factory activity accelerated in October as new orders surged to their highest level in nearly 17 years.
Spiraling Covid-19 infections could force authorities to re-impose restrictions to slow the spread of the respiratory illness as winter approaches, undercutting spending.
More than US$3 trillion in government pandemic relief for businesses and workers, which fired up economic growth in the third quarter, has dried up. There is no deal in sight for another rescue package.
These factors have left economists anticipating a sharp slowdown in economic growth in the fourth quarter. The economy grew at a historic 33.1 per cent annualised rate in the third quarter.
That followed a record 31.4 per cent pace of contraction in the April-June quarter.
The ISM survey's measure of new orders for the services industry dropped to a reading of 58.8 in October from 61.5 in September. But backlog orders and export orders increased last month. The survey's index of services industry employment slipped to 50.1 from a reading of 51.8 in September.
That fits in with expectations for slower job growth in October. According to a Reuters survey of economists, nonfarm payrolls probably increased by 600,000 jobs last month after rising 661,000 in September. Employment growth has cooled from a record 4.781 million in June. Of the 22.2 million jobs lost during the pandemic, about 11.5 million have been recovered.