(Nov 5): US services activity expanded in October at the fastest pace in eight months on a swift upturn in the growth of new orders.
The Institute for Supply Management’s index of services rose 2.4 points last month to 52.4, the group said Wednesday. Readings above 50 indicate expansion in the largest part of the economy, and the latest figure exceeded all projections in a Bloomberg survey of economists.
The orders index jumped 5.8 points to a one-year high of 56.2. The business activity index, which parallels the ISM’s factory output gauge, swung back into expansion territory having advanced 4.4 points to 54.3.
The rebound in demand was also accompanied by more pronounced inflationary pressures. The group’s prices-paid index rose to a three-year high of 70, indicating the services economy is bearing a bigger brunt of higher US import duties.
“Respondents continued to mention the impact of tariffs on prices paid,” Steve Miller, chair of the ISM Services Business Survey Committee, said in a statement. “There was no indication of widespread layoffs or reductions in force, but the federal government shutdown was mentioned several times as impacting business activity and generating concerns for future layoffs.”
See also: US shutdown hurts low-income shoppers, says Food Lion owner
However, there may be scope for some relief in coming months. The ISM’s manufacturing report on Monday suggested price pressures continued to ease for producers, a trend that may eventually trickle down to services providers.
The services report also showed employment is starting to stabilise. The group’s index climbed to a five-month high of 48.2, indicating employment shrank but at a slower pace.
Separate data out Wednesday from ADP Research showed employment at US companies increased in October for the first time in three months. While helping to temper concerns of a faster deterioration in job market, the modest payrolls gain is consistent with a general softening in labour demand.
See also: US companies added 42,000 jobs in October, ADP data show
Eleven services industries expanded last month, led by accommodation and food services, retail trade and wholesale trade. Six contracted.
Select ISM industry comments
“Uncertainty due to the federal government shutdown has shuttered many non-essential functions. This will lead to project delays and likely hurt our overall fiscal year 2026 expectations.” — Management of Companies
“Relatively flat activity levels for oil and gas.” — Mining
“Client demand for advisory and compliance services remains solid, particularly as businesses navigate evolving tax legislation and increased regulatory scrutiny.” — Professional, Scientific & Technical Services
“Heightened business activity due to new fiscal year budget. Items made with or utilising precious metals are up, basic labour is down — though maintaining employees has been more difficult since a return-to-office order was implemented.” — Public Administration
“The overall economy continues to provide mixed signals, which makes it difficult to determine how to move forward as a business given the uncertainty.” — Real Estate, Rental & Leasing
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“Business very strong, no supply chain or logistical issues.” — Retail Trade
“General business has been steady, with minimum fluctuation.” — Transportation & Warehousing
“Tariffs continue to cause disruption in contracts and contracting, driving up pricing on goods, particularly engineered and manufactured equipment.” — Utilities
“Business seems to be picking up. Multifamily is a big driver. I think most projects that have been postponed are finally coming to fruition as lumber prices have found a bottom. The outlook is better with the Fed’s plan to continue with rate cuts.” — Wholesale Trade
Inventories barely contracted in October and a larger share of service providers continued to see their stockpiles as too high relative to business activity.
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