–ISM’s Nieves: Port Congestion Has Eased but Unloading Taking Time
–ISM’s Nieves: Firms Still Face Price Pressures but Inflation Peaking
–ISM’s Nieves: China Factory Shutdown Amid Covid Restrictions Affecting US Imports
By Max Sato
(MaceNews) – US service sector growth accelerated slightly in August on higher new orders, improving employment and easing supply constraints, after picking up its pace for the first time in four months in July, according to the latest survey by the Institute for Supply Management (ISM) released Tuesday.
The main index, which shows the directional change of economic activity, indicated the sector continued growing for the 27th straight month, staying above the key 50 line. It edged up 0.2 percentage points to a four-month high of 56.9 in August after rising 1.4 points to 56.7 in July from June’s 55.3, which was the lowest since 45.2 in May 2020.
The index stayed well above the recent low of 41.5 hit in April 2020 and 40.1 in March 2009, the lowest since the inception of the Services PMI in 2008. But it also remains well below the record high of 68.4 in November 2021.
“The services sector had a slight uptick in growth for the month of August due to increases in business activity, new orders and employment,” Anthony Nieves, chair of the ISM Services Business Survey Committee, said in a statement. “Based on comments from Business Survey Committee respondents, there are some supply chain, logistics and cost improvements; however, material shortages remain a challenge. Employment improved slightly despite a restricted labor market.”
The overall business activity index stood at 60.9 in August, up 1 percentage point, after rising 3.8 points to 59.9 in July. The new orders index rose a further 1.9 points to 61.8 following a 4.3-point rise to 59.9 the previous month.
The supplier deliveries index posted the second straight monthly drop, falling 3.3 points to 54.5 in August after dipping 4.1 points to 57.8 in July and edging up 0.6 point to 61.9 percent in June. A reading of above 50 indicates slower deliveries, which is typical as the economy improves and customer demand increases.
Port congestion on the U.S. West Coast has improved in the last four to six months but the U.S. service sector still faces challenges in cargo unloading due to limited warehouse and trucking capacity, Nieves told reporters.
The employment index rose 1.1 points to 50.2 in August after gaining 1.8 points to 49.1 in July. It showed growth after contracting for the previous two months.
The prices index fell for the fourth consecutive month in August, down 0.8 point at 71.5 percent after sliding 7.8 points to 72.3 in July. It is well below a record high of 84.6 in April.
“Inflation is still there but peaking and cooling off a bit,” Nieves told reporters.
“Because of recession fears and inflation, we had consumer sentiment declined a bit. It’s popped up recently because of the fuel prices coming down.”
On the downside, Nieves said China’s strict Covid policy has caused factory shutdowns, delaying imports of goods to the U.S.
“Supply chain issues continue to significantly extend lead times, with a shortage of materials to build scientific equipment and machinery contributing to the issue,” a firm providing educational services told the ISM. “Purchases need to be made three to six months in advance, in addition to the normal lead time.”
A company in the management of companies and support services industry said: “The supply chain challenges affect a portion of our buys as they include products and components made outside of the U.S. that are subject to shipping delays and other issues.”
“The supply chain and labor continue to be significant issues,” said a firm in the health care and social assistance category. “Repair parts are nonexistent. Lead times for durable goods are extended, and the less-expensive, mass-produced products are breaking at increased rates.”