U.S. services growth remains at solid pace, price pressures ease

Growth at U.S. service providers remained firm in September, reflecting solid business activity and orders, while a measure of prices fell to the lowest since the start of 2021.

The Institute for Supply Management’s gauge of services softened to 56.7 last month from 56.9 in August, according to data released Wednesday. Readings above 50 signal growth and the figure was slightly firmer than the median projection of 56 in a Bloomberg survey of economists.

While the measure of business activity, which parallels the ISM factory production index, and the new orders gauge both declined from the strongest readings of the year, they remained elevated.

That suggests demand for services is healthy despite high inflation, rising interest rates and growing concerns about the economy’s prospects. Fifteen service industries reported growth in September, led by mining, other services, education and agriculture.

The ISM’s index of services employment advanced to the highest level in six months, suggesting companies are having greater success hiring. The measure rose to 53 in September from 50.2, pointing to an easing of tight labor conditions that have driven up wages and contributed to inflation.

A fifth-straight decline in a measure of prices paid by service providers adds to evidence of moderating cost pressures. The ISM’s index dropped to 68.7 last month, the softest print since January 2021.

The report also indicated supply chains are continuing to normalize. Order backlogs fell to a four-month low and supplier delivery times increased at the slowest speed since February 2020.

Meantime, service providers appear to be making progress reducing inventory levels. The ISM’s index of stockpiles fell to the lowest since October of last year. A measure of inventory sentiment was little changed and continued to signal more service firms see stockpiles as being too low rather than too high.

The report also indicated a quickening in export growth that defied concerns of a global recession. The export orders index increased to 65.1 in September, the highest since July 2021.