As US manufacturing activity slows down, spending on services is keeping the American economy afloat, recent data suggests.
Growth in the services sector accelerated in August for the second month in a row, according to the Institute for Supply Management index released Tuesday. The indicator, which is based on a survey of purchasing and supply executives, came in at 56.9% in August, reaching its highest point in four months. (A reading above 50% denotes expansion.)
Survey responses show a booming services sector as companies benefit from a slowdown in inflation and more reliable supply chains. Executives in a variety of areas, from mining to real estate, reported business is growing. Agriculture, forestry, fishing and hunting, and arts, entertainment and recreation were the only two sectors to contract.
“Starting to see some cost pressures relief,” said one survey participant in the food services industry. “The overall supply environment is healthy.”
Other data underscore the trend. The personal consumption expenditure report, released by the Bureau of Economic Analysis a couple of weeks ago, showed that, adjusted for inflation, spending on services increased by 0.2% in July compared to June.