US ISM Services: Most components moving in the right direction – Wells Fargo

The ISM service sector activity index showed the highest reading in four months, after an unexpected increase in August. The underlying details point to services resilience with business activity and new orders notching their highest reading this year, explained analysts at Wells Fargo. They point out that supply challenges are easing, but hiring remains a challenge for employers.

Key Quotes: 

“The ISM services index rose 0.2 points in August to 56.9, marking the fastest pace of expansion in the sector in four months. Most of the underlying components of the survey moved in the right direction and the headline index was buoyed by a pickup in business activity and new orders.”

“While hiring remains a challenge, the employment component climbed back into expansion territory in August. Hiring has wobbled between expansion and contraction for most of the year, despite sturdy job gains in the actual payroll report. Some of the gap is likely explained by employers being unable to find workers.”

“Among many crosscurrents in the economy at present, the outlook for services spending is an important one and the latest data suggest continued expansion in the sector. Consumer demand looks to be resilient despite high inflation and rising interest rates. It's not a lack of demand, but still strained supply that remains the biggest issue.”