US services sector expands in August as prices ease

The American services sector expanded at a slightly faster pace in August amid signs of easing supply issues and slowing price gains, according to an industry survey released on Tuesday.

The Institute for Supply Management's services index rose to 56.9 percent, just slightly above the July level, defying expectations of a slowdown.

The new orders index jumped 1.9 percentage points, and employment rose 1.1 points, ISM said, while prices slipped 0.8.


"The services sector had a slight uptick in growth for the month of August due to increases in business activity, new orders and employment," ISM survey chair Anthony Nieves said in a statement.

Firms responding to the survey noted "some supply chain, logistics and cost improvements; however, material shortages remain a challenge," he said.

On the plus side, "employment improved slightly despite a restricted labor market."

The sector accounts for two-thirds of the US economy and comprises a wide variety of services, from education to IT to medicine.

Even amid soaring US inflation, the sector has grown steadily for 151 months, except for a two-month contraction as the United States grappled with the beginning of the coronavirus pandemic in April and May 2020.

In contrast, growth in the manufacturing sector was flat in August.

The Federal Reserve is on an aggressive campaign to combat the highest US inflation in four decades, fueled by global supply chain challenges, raising interest rates to cool demand.

Rubeela Farooqi of High Frequency Economics said despite the upside surprise in the services sector, "momentum is likely to moderate as economic activity continues to adjust to Fed rate hikes."