US services sector index jumps to record high

[WASHINGTON] A measure of US services industry activity surged to a record high in October likely as declining Covid-19 cases boosted demand, but businesses remained burdened by snarled supply chains and the resulting exorbitant prices.

The significantly improved public health picture appears to be lifting the labour market, with other data on Wednesday showing an acceleration in private payrolls growth last month.

The reports suggested the economy was regaining momentum early in the fourth quarter after being restrained by the Delta variant of the coronavirus and shortages last quarter.

"The recovery is continuing in the fourth quarter, but supply-chain disruptions and hiring difficulties will continue to constrain growth," said Gus Faucher, chief economist at PNC Financial in Pittsburgh, Pennsylvania. "Labour supply should pick up in the months ahead, but it will take months for supply chains to return to normal."

The Institute for Supply Management said its non-manufacturing activity index vaulted to a reading of 66.7 last month. That was the highest since the series started in 1997 and followed a 61.9 reading in September. 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 that the index would edge up to 62.0. The summer wave of infections driven by the Delta variant has subsided, encouraging more consumption of services like air travel and dining out.

The ISM survey's measure of new orders received by services businesses soared to a record last month. Spending is shifting from goods to services.

REUTERS