US service industry expansion cools from month-earlier record

[WASHINGTON] US service providers expanded at a robust pace in August, though a step slower than the record rate seen a month earlier as a gauge of business activity moderated.

The Institute for Supply Management's services index fell to 61.7 last month from 64.1 in July. Readings above 50 indicate expansion.

The figures suggest that concerns about the highly contagious Delta variant are cooling demand for some services like dining out, leisure and travel. The ISM gauge of business activity, which parallels the group's factory production measure, fell to six-month low of 60.1.

Service providers are also facing many of the same supply and labour constraints as manufacturers. Inventories contracted further in August, falling to the lowest level in a year, while a measure of services employment eased slightly.

"The tight labour market, materials shortages, inflation and logistics issues continue to cause capacity constraints," Anthony Nieves, chair of the ISM services business survey committee, said in a statement.

Figures earlier from the Labor Department showed hiring downshifted abruptly in August with the smallest jobs gain in seven months. Employment in leisure and hospitality, which has posted strong gains recently, was flat amid the spreading delta variant and persistent hiring challenges.

The report did, however, offer some indication that the recent build-up in inflationary pressures is moderating. The ISM's prices paid index fell to the lowest since March after hitting an almost 16-year high in July. Meantime, supplier delivery times and order backlogs indexes eased.

The report follows the ISM's report on factory activity, which showed manufacturing expanded at a stronger-than-expected pace in August, reflecting faster orders and production growth as well as rising backlogs consistent with global supply chain challenges.

BLOOMBERG