ISM services sector index ticks higher than expected in August
Growth in the US services sector picked up more than expected in August, according to figures released on Thursday.
The Institute for Supply Management's services index rose to 56.4 from 53.7 in July, beating expectations for a reading of 54.0.
The non-manufacturing business activity index increased to 61.5 from 53.1 the month before.
Meanwhile, the new orders index printed at 60.3 compared to 54.1 in July and the employment index fell to 53.1 from 56.2. The prices index rose to 58.2 last month from 56.5 in July.
Respondents said they remained concerned about tariffs and geopolitical uncertainty. However, they were mostly positive about business conditions.
Paul Ashworth, chief US economist at Capital Economics, said the rebound in the ISM non-manufacturing index is a reminder - alongside the August ADP data released earlier - that the US economy is hanging in there, even though the manufacturing sector specifically is in recession.
"Nevertheless, the weighted average of the manufacturing and non-manufacturing indices is still only at a level consistent with GDP growth of slightly less than 2% annualised, which is about the pace implied by our GDP trackers for third-quarter growth.
"Looking at the breakdown, the new orders and business activity indices both rebounded sharply, but the employment index fell further to 53.1, from 56.2. At that level, the employment index is consistent with monthly service sector payroll gains of 125,000, which is well below the 184,000 gain reported in the ADP survey.
"Overall, there is still only limited evidence of the global manufacturing weakness spilling over into domestic services."
Ian Shepherdson, chief economist at Pantheon Macroeconomics, said: "This looks good relative to the consensus but the key point here is that under normal circumstances we would have expected a much higher number. The index tends to lag the rate of growth of core retail sales, which pointed to a reading of about 59.
"Instead, the survey is weaker than implied by the sales numbers for the third straight month, presumably because fear of the impact of tariffs on imported consumer goods, and higher tariffs on non-consumer goods, is outweighing the positive effect of recent strong growth in core retail sales.
"As a result, the employment index fell to 53.1, the lowest reading since March 2017, from 56.2 in July. Coupled with the drop in the manufacturing employment index reported Tuesday, and the weakness of temporary hiring, our index of hiring intentions is now at its lowest point since early 2017, and it signals to sub-100K payroll growth by November."