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US service economy moderates in September: ISM

H.S. Borji
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The US service economy remained elevated in September, as output and new orders continued to support job creation, but the pace of growth moderated from the previous month’s record high.

The Institute for Supply Management’s gauge of national service activity declined to 58.6 from 59.6, which was the highest reading since the survey’s inception in January 2008. A median estimate of market analysts called for a decrease to 58.5.

The US service economy has been above the 50 mark that separates expansion from contraction for 56 consecutive months. The national gauge had reached a record high in each of the previous two months.

Twelve non-manufacturing industries expanded last month, led once again by the construction sector. Retail trade and utilities also registered strong gains. Five industries reported declines last month, led by arts and entertainment, mining, and educational services.

Overall business activity eased in September, but maintained its robust growth pace. Thirteen major service sub-sectors reported growth, led by retail trade, utilities, and information services. Four industries reported declines last month, ISM data showed.

New orders increased sharply in September, albeit at a slower rate than the previous month. New orders growth was led by utilities, information, and retail trade. In total, 12 services industries reported growth last month.

New export orders increased in September for the sixth consecutive month and at a faster pace than in August. Seven industries reported an increase in export orders, ISM data showed.

“Orders continue to be steady and forecasts are strong for the remainder of the year. There does not appear to be significant growth, but a steady strong business level,” according to a representative from professional, scientific and technical services.

“Positive sales growth for the quarter is encouraging. Continue to see pricing pressure in most sectors which directly impact profit,” said another from retail trade.

Services sector employment increased for the seventh consecutive month, led by construction, retail trade, and management of companies and support services. In total, ten industries said they increased payrolls in September.

The private services sector added 207,000 payrolls in September, the Labor Department said today. That is a significant improvement over the previous month, where service providers added just 161,000 payrolls.

Among service providers, retail trade added more than 35,000 payrolls, while information and financial services added 12,000 each. Employment in education and health services increased 32,000, official data showed.

Total nonfarm payrolls growth for the month of September was 248,000, which marked the seventh time in eight months jobs growth was above the 200,000 mark. The US economy has added an average of 213,000 jobs per month over the 12 months, government economists reported today.

The service economy, which accounts for more than two-thirds of US gross domestic product, continues to play a leading role in sustaining the recovery. As a result of strong service activity, among other factors, the US economy is forecast to grow at an annual rate of 3 percent in the third quarter.

The Commerce Department will post an advance estimate of third quarter growth October 30.

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