The expansion of the service sector slowed last month from an almost eight year high as new business fell off and employment gains reversed.
The Institute for Supply Management survey index of purchasing managers in non-manufacturing industries dropped to 54.4 in September from 58.6. Economists in the Reuters poll had forecast 57.4. The August reading was the highest level for the composite index since November 2005. The prior post-recession high had been 58.1 in February 2011. This index has been above the 50 line separating expansion from contraction for just under four years, since January 2010.
Of the ten component indices seven retreated in September, two improved and one was unchanged. Employment dropped to 52.7, it’s weakest since May from 57.0 in August, a six month high. New orders fell to 59.6 from 60.5 a two and a half year top and business activity slid to 55.1 from 62.2. Supplier Deliveries, business inventories, inventory sentiment and business imports also declined. Export orders and prices rose, and order backlogs were unchanged.
This service report contrasts with Monday's ISM manufacturing survey which rose to 56.2 in September its best level in almost two and a half years although new orders and export orders fell but employment and production improved.
The service sector comprises between 85% and 90% of the U.S. economy.
Chief Market Strategist