US services sector growth cools for second straight month
November 3, 2023 08:31 PM
Activity in the US services sector slowed for a second consecutive month in October, according to survey data released Friday.
The services index of the Institute for Supply Management (ISM) logged 51.8 per cent last month, down from September's 53.6 per cent reading.
A figure above the 50-point mark signals growth in the sector, meaning that despite the slowdown, the services industry has grown for a 10th straight month.
The cooling comes on the back of decreases in the business activity and employment indexes, said ISM survey chair Anthony Nieves in a statement.
He added that respondents' sentiment "is mixed, with some optimistic about the current steady and stable business conditions and others concerned about such economic factors as inflation, interest rates and geopolitical events."
"Employment-related challenges are also prevalent, with comments about increasing labour costs, as well as shortages," he said.
This comes as the Federal Reserve has embarked on an aggressive campaign since early 2022 to lower inflation by lifting interest rates.
Services sector activity has held up despite the higher rates, which lift borrowing costs for households and businesses.
For now, 12 services industries reported growth in October, while five reported a decrease.
"In general, commodity prices are coming down, but some categories, especially labour, are still elevated and will remain so for the immediate future," said a respondent in the accommodation and food services industry.
"Suppliers are citing increased labour costs -- wages, salaries and benefits -- as the biggest reason for their price increases," the respondent added.
Businesses are also keeping an eye on unrest in the Middle East, which some said could have an impact on fuel costs, according to the ISM survey.