US Services Sector Growth and Inflation Insights

US Services Sector Surveys Indicate Growth and Rising Prices The US Services sector surveys have provided data that supports the narrative of a soft economic landing, despite previous weaknesses in the Manufacturing surveys.

Steady Expansion in the US Services PMI

The US Services PMI, as per S&P Global, remained relatively steady at 55.2, which is close to the highest since March 2022. Additionally, the ISM Services PMI surged to 54.9, significantly above the expected 51.7 print, marking the highest since February 2023.

Insights from Chief Business Economist at S&P Global Market Intelligence

Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, stated that the US service sector businesses reported strong growth at the end of the third quarter. He noted that the output continued to grow at one of the fastest rates seen over the past two-and-a-half years. Williamson also mentioned that the inflows of new business in the service sector grew at a rate only marginally less than August’s 27-month high. He attributed this to lower interest rates, which have buoyed demand, particularly for financial services.

Concerns and Uncertainties

Despite the positive growth, Williamson indicated that companies have become increasingly concerned about the future. Business confidence slumped in September due to uncertainties caused by the upcoming election and perceptions of rising recession risks. Furthermore, the growth has become increasingly uneven, with the service sector being the sole driver of growth as manufacturing has slipped into a decline.

Inflation Signals and Price Pressures

The survey also revealed inflation signals pointing to reviving price pressures, mainly linked to stubbornly high wage growth. This could potentially dampen the Federal Reserve's enthusiasm for further aggressive rate cutting.

ISM Prices Paid Spikes

The ISM Prices Paid index spiked to its highest since February 2023, indicating a significant increase in prices.

Bottom Line

The data from the US Services sector surveys paints a picture of steady growth and rising prices. However, the uneven growth and concerns about the future due to political uncertainties and perceived recession risks present a complex economic landscape. What are your thoughts on these developments? Share this article with your friends and discuss. Don't forget to sign up for the Daily Briefing, delivered every day at 6pm.