US re­ces­sion risks up as ser­vices growth hits three-year low

The Korea Times - - WORLD BUSINESS -

WASH­ING­TON (Reuters) — U.S. ser­vices sec­tor ac­tiv­ity slowed to a three-year low in Septem­ber amid ris­ing concerns about tar­iffs, sug­gest­ing that trade ten­sions were spilling over to the broader econ­omy.

Com­ing on the heels of news this week that man­u­fac­tur­ing ac­tiv­ity plunged to a more than 10-year trough in Septem­ber, the sur­vey from the In­sti­tute for Sup­ply Man­age­ment (ISM) on Thurs­day in­creased the risks of a re­ces­sion. For now, a solid la­bor mar­ket is keep­ing the econ­omy on a mod­er­ate growth path.

The raft of weak data could prompt the Fed­eral Re­serve to cut in­ter­est rates again this month to keep the long­est eco­nomic ex­pan­sion in his­tory, now in its 11th year, on track. The U.S. cen­tral bank cut rates last month after re­duc­ing bor­row­ing costs in July for the first time since the 2008 fi­nan­cial cri­sis.

“This down­turn is start­ing to spread and that means the tea leaf read­ers at the Fed are go­ing to be tee­ing up a third rate cut this year when they next meet again at the end of this month,” said Chris Rup­key, chief econ­o­mist at MUFG in New York.

The ISM said its non-man­u­fac­tur­ing ac­tiv­ity in­dex fell to a read­ing of 52.6 in Septem­ber, the low­est since Au­gust 2016, from 56.4 in Au­gust. A read­ing above 50 in­di­cates ex­pan­sion in the ser­vices sec­tor, which ac­counts for more than two-thirds of U.S. eco­nomic ac­tiv­ity. Economists polled by Reuters had fore­cast the in­dex fall­ing to 55.1 in Septem­ber.

The ISM re­ported on Tues­day that its mea­sure of na­tional man­u­fac­tur­ing ac­tiv­ity plunged in Septem­ber to its low­est level since June 2009, when the Great Re­ces­sion was end­ing.

It said ser­vices in­dus­try busi­nesses “are mostly con­cerned about tar­iffs, la­bor re­sources and the di­rec­tion of the econ­omy.” The ISM said 13 in­dus­tries, in­clud­ing pub­lic ad­min­is­tra­tion, and fi­nance and in­sur­ance, re­ported growth last month. Ed­u­ca­tional ser­vices and other ser­vices re­ported a con­trac­tion.

Newspapers in English

Newspapers from Korea, Republic

© PressReader. All rights reserved.