U.S. Services Index Climbs To Six-Month High In August

(RTTNews) - Service sector growth in the U.S. accelerated by more than anticipated in the month of August, according to a report released by the Institute for Supply Management on Thursday.

The ISM said its services PMI rose to 52.0 in August from 50.1 in July, with a reading above 50 indicating growth. Economists had expected the index to inch up to 50.5.

With the bigger than expected increase, the services PMI reached its highest level since hitting 53.5 in February.

The report showed a notable acceleration in the pace of growth by new orders, as the new orders index surged to 56.0 in August from 50.3 in July.

The business activity index also climbed to 55.0 in August from 52.6 in July, with the ISM noting the index has not been in contraction territory since May 2020.

The ISM said the imports index also spiked to 54.6 in August from 45.9 in July, returning to expansion territory and reaching its highest reading since hitting 59.9 in January 2024.

"Commentary once again was led by respondents' increasing citations of tariff impacts, with some indication that business activity and imports are being driven by an attempt to get ahead of additional price increases while preparing for the holiday peak season," said Steve Miller, Chair of the ISM Services Business Survey Committee.

Meanwhile, the report said the employment index crept up to 46.5 in August from 46.4 in July, although the reading below 50 indicates employment activity in the services sector was in contraction territory for the third month in a row.

The ISM also said the backlog of orders index slumped to 40.4 in August from 44.3 in July, hitting its lowest reading since hitting 40.0 in May 2009.

On the inflation front, the report said the prices index fell to 69.2 in August from 69.9 in July but remained above 60 for the ninth straight month.

The ISM released a separate report on Tuesday showing a slight increase by its reading on U.S. manufacturing activity in the month of August, although the index still indicated the sixth consecutive month of contraction.

While the ISM said its manufacturing PMI inched up to 48.7 in August after falling to a nine-month low of 48.0 in July, a reading below 50 still indicates contraction. The uptick matched economist estimates.