The Institute for Supply Management’s (ISM) non-manufacturing index came in at 58.5 for August, rising by 2.8 points and easily cruising past consensus expectations for a more moderate 56.8.
The details of the report were largely positive, adding credence to the view that the U.S. economy is still at the top of its game. Seven of the ten sub-components were up on the month. Of note were business activity (+4.2 to 60.7), new orders (+3.4 to 60.4) and supplier deliveries (+3.0 to 56.0).
The prices paid index is still firmly in expansion territory (62.8), but the rate of price growth decelerated slightly (-0.6). The employment index was up marginally (+0.6 to 56.7) as tight labor market appears to be a limiting factor for the pace of employment growth.
Trade-related subcomponents were mixed. New export orders regained the ground conceded last month (+2.5 to 60.5), while imports edged down (-0.5 to 52.0).
Survey respondents continued to express optimism about the economic and business outlook, even while some remained apprehensive regarding logistical difficulties, trade wars and a dearth of available labor.
Key Implications
After dipping in July, the ISM non-manufacturing index has again picked up speed and continues on its upward trajectory, akin to the path of its manufacturing equivalent. With 16 out of the 17 industries surveyed reporting stronger business, the US services sector is showing broad-based healthy growth.
Despite the generally upbeat outlook, non-manufacturing firms still face headwinds ranging from labor shortages to uncertainty stemming from tariffs and threats of tariffs. All in all, most respondents were positive, with their companies well-positioned to weather the storm, which is set to continue as the economy grapples with full employment and rising interest rates.
