Home / International/ US services sector growth hits five-month low

US services sector growth hits five-month low


Comments / {{hitsCtrl.values.hits}} Views / Thursday, 10 January 2019 00:00

Facebook

Warehouse workers deal with inventory stacked up to the ceiling at an ABT Electronics Facility in Glenview, Illinois, U.S. - Reuters

NEW YORK (Reuters): US services sector activity slowed to a five-month low in December, but remained above a level consistent with solid economic growth in the fourth quarter.

The Institute for Supply Management said on Monday its non-manufacturing activity index fell to 57.6 last month, the lowest reading since July, from 60.7 in November.

Still the index stayed well above the 50 mark, suggesting expansion of the vast services sector. Analysts polled by Reuters had forecast a reading of 59.0.

Economists said while the drop in the services industries measure echoed recent declines in other business surveys, including the ISM’s manufacturing survey published last week, the reading was still strong by historic standards.

“We have seen a range of different indicators lately that point to some softening in the economy as well as rising recession risks, but we think that the economy will continue to expand at a decent pace despite some moderation in growth,” said Daniel Silver, an economist at JPMorgan in New York.

Growth estimates for the fourth quarter are around a 2.6% annualised rate. The economy grew at a 3.4% pace in the third quarter.

The ISM described growth as having “cooled,” noting that trade tensions between the United States and China remained a major concern for businesses. It also said that while capacity constraints had eased, finding workers was still a challenge.

A measure of services industries employment fell to a reading of 56.3 last month, the lowest since July, from 58.4 in November. While industries reported a modest increase in new orders amid strong exports, order backlogs declined sharply.

Companies in the wholesale trade industry said they were anticipating “a pullback year in demand for 2019,” citing several factors, including the trade dispute with China, a stock market sell-off, higher mortgage rates as well as labor shortages and higher material costs.

There were concerns in the company management and support services industries about the trade war with China, with companies saying they were expecting “lower profit margins and reduced sales for 2019 until our suppliers can source product from other countries.”

But retailers described business as being “very good.” Companies in the real estate, rental and leasing industries reported business as “exceeding expectations” and anticipated that “2019 should equate or exceed 2018.”

News of the decline in service sector growth followed ISM’s data released last week that showed a sharp slowdown in manufacturing activity in December.

The drop in factory activity and an ebb in consumer confidence had fueled investor fears of a recession. Those fears were allayed on Friday after a government report showed job growth in December was the largest in 10 months.

“We believe this report adds further weight to the case that the economic data have solid momentum and that fears of a sharp slowing in growth are overblown,” said John Ryding, Chief Economist at RDQ Economics in New York.


Share This Article

Facebook Twitter


DISCLAIMER:

1. All comments will be moderated by the Daily FT Web Editor.

2. Comments that are abusive, obscene, incendiary, defamatory or irrelevant will not be published.

3. We may remove hyperlinks within comments.

4. Kindly use a genuine email ID and provide your name.

5. Spamming the comments section under different user names may result in being blacklisted.

COMMENTS

Today's Columnists

Implementing SC Orders

Wednesday, 26 June 2019

The Supreme Court on 18 April has ordered six Ministries, their Secretaries and three Government authorities to take immediate several effective measures to be enforced in the design and construction of all parts of new buildings and services the pub


Need for an education revolution: Future of our kids and the nation is at risk – Part I

Wednesday, 26 June 2019

It is said that a country is only good as her people. A country belongs to her people. In a democratic country, people elect the leaders to manage the country on their behalf. Hence, to be hailed as a progressive country, it is paramount for a countr


Universalism versus tribalism

Wednesday, 26 June 2019

The most venerable Warakagoda Sri Gnanarathana Thero Mahanayake of the Asgiriya chapter has announced that his recent remarks, have been misconstrued and distorted. The authenticity of recorded information in cyber space is an inconvenient truth of t


A sermon on stoning

Tuesday, 25 June 2019

It is generally assumed we have passed the Stone Age, the Bronze Age, the Iron Age, the Industrial Age, and the Space Age.After a breath-taking dive in to the Digital Age, we are well on our way to the Age of Automation and Artificial Intelligence. N


Columnists More