The largest part of the U.S. economy is still showing moderate expansion.
Topline: U.S. service industries grew by more than expected in October, rebounding from a three-year low in September and showing steady but moderate growth in the biggest part of the economy, according to new data from the Institute for Supply Management.
- The Institute for Supply Management (ISM), an association of purchasing managers, released a new survey on Tuesday showing that its nonmanufacturing index rose to 54.7%, beating out the 53.5% forecast by economists.
- The nonmanufacturing index measures the U.S. service sector, which accounts for more than two thirds of domestic economic activity.
- Service sector activity rebounded and grew at a faster pace in October, up from 52.6% in September—which was a three-year low.
- Measures of sales, new orders and employment all improved from last month, showing that the largest part of the U.S. economy remains stable (any reading above 50 indicates growth).
- The ISM survey also found that companies are continuing to add workers, indicating that employment remains strong, especially following on the heels of last week’s upbeat jobs report: The U.S. economy added 128,000 jobs in October, far exceeding the 75,000 estimated.
Key background: While October’s 54.7% is in line with this year’s average, it is well below 2018 levels, reflecting the emerging slowdown in economic growth that has hit the U.S. this year. Recent economic data shows a widespread decline in manufacturing that some worry will drag down the rest of the economy, though other metrics have largely held steady. While inflation still remains fairly low, consumer spending and employment levels have stayed strong, helping drive the stock market to record highs.
Chief critic: A different measurement of service industries on Tuesday, from IHS Markit, shows the slowest growth in activity since February 2016, as export businesses continued to get hit by tariff pressures.
