US services growth accelerates despite rising prices, survey finds

US services growth accelerates despite rising prices, survey finds

The sector has grown steadily for 150 months except for a two-month contraction as the United States grappled with the beginning of the coronavirus pandemic in April and May 2020. — Reuters pic

Thursday, 04 Aug 2022 5:15 AM MYT

WASHINGTON, Aug 4 — Growth in the massive US services sector accelerated in July for the first time in four months, according to an industry survey released Wednesday.

Despite soaring inflation, the Institute for Supply Management’s services index rose 1.4 points to 56.7 per cent, defying expectations among economists who had predicted another slowdown.

The sector has grown steadily for 150 months except for a two-month contraction as the United States grappled with the beginning of the coronavirus pandemic in April and May 2020.

“Growth continues — at a faster rate — for the services sector,” survey chair Anthony Nieves said in a statement, attributing the improvement last month to “an increase in business activity and new orders.” The sector accounts for two-thirds of the US economy and comprises a wide variety of services, from education to IT to medicine. The faster growth is in contrast to the manufacturing sector which has slowed for two months.

But executives pointed to some softening as they struggle to adjust to rising prices.

“Can feel the economy weakening. Clients are making appropriate moves in anticipation of a recession,” one executive in the management sector said.

New orders in services industries jumped 4.3 points, while the prices index dropped for the third consecutive month, falling 7.8 points to a still-high 72.3 per cent, the survey showed. Anything above the 50-per cent threshold indicates expansion.

Amid a tight US job market, hiring contracted for a second straight month, with the employment index clocking in at 49.1 per cent, although that was 1.7 per centage points higher than the prior month.

Oren Klachkin of Oxford Economics said the July data “offer encouraging news about the state of the economy at the beginning of the second half of 2022.” But he warned that moving forward “services activity will be fairly muted as hot inflation, tighter financial conditions, supply chain stress, downbeat sentiment and softening spending restrain growth.” — AFP