September service-sector growth still strong

Growth at U.S. service providers remained firm in September, reflecting solid business activity and orders, while a measure of prices fell to its lowest level since early 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 September figure was slightly firmer than a median projection of 56 in a Bloomberg survey of economists.

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

The elevated readings suggest demand for services is healthy despite high inflation, rising interest rates and growing concerns about the economy. Fifteen service industries reported growth in September, led by mining, other services, education and agriculture.

The institute’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 institute’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.

Meanwhile, service providers appear to be making progress reducing inventory levels. The institute’s index of stockpiles fell to its lowest level since October 2021. A measure of inventory sentiment was little changed and continued to signal that more service firms see stockpiles as being too low.

The Wednesday 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.