Record growth for US service sector

EditorialRoom 8th December 2021

The Institute for Supply Management, a trade group of purchasing managers, released a report showing the U.S. service sector growth unexpectedly accelerated in November.

The ISM said its services PMI jumped to a record high 69.1 last month from 66.7 in October, easily beating market expectations of 65, with a reading above 50 indicating growth in the sector.

It was the fastest pace of expansion in the services sector since the series began in 1997. The services sector accounts for more than two-thirds of U.S. economic activity.

“In November, record growth continued for the services sector, which has expanded for all but two of the last 142 months,”  Anthony Nieves, Chair of the ISM Services Business Survey Committee said.

“Demand continues to outpace supply that has been impacted by capacity constraints, shortages of labor and materials, and logistical challenges,” he added. “This has also caused demand-pull inflation that is affecting overall business conditions.”

The business activity index jumped to 74.6 in November from 69.8 in October. The ISM’s measure of services industry employment also shot up to 56.5 in November from 51.6 in October, a seven-month high.

However, a Labor Department report showed there was a major slowdown in the service sector with just 175,000 private service sector jobs added s in November after spiking by 534,000 jobs in October.

On the bright side, the unemployment rate slid to 4.2 percent in November from 4.6 percent in October. Economists had expected the unemployment rate to edge down to 4.5 percent.

The ISM also said the new orders index and the supplier deliveries stood at 69.7 and 75.7, respectively, unchanged from October. Meanwhile, the backlog of orders index dropped to 65.9 in November from 67.3 in October.

The prices index also fell to 82.3 in November from 82.9 in October, although the index was still at its third-highest reading since September 2005, the ISM said.

A separate report showed that the ISM index of manufacturing activity rose to a reading of 61.1 last month from 60.8 in October and broadly in line with market consensus of 61.0.

The latest reading indicated expansion in the manufacturing sector for the 18th month in a row after a contraction in April 2020.

Thirteen of the 15 manufacturing categories reported growth in November, led by apparel and furniture. The only two that contracted were printing and primary metals.

ISM said the broad sentiment of its panel remained strongly optimistic, but they “remain focused on the importance of improving supply chain issues to respond to ongoing high levels of demand,” said Timothy R. Fiore, head of ISM’s manufacturing survey committee.

Manufacturing accounts for 12% of the U.S. economy.