ISM non-manufacturing index drops more than expected in October

Service sector activity in the US deteriorated more than expected in October, according to figures released on Thursday.

The Institute for Supply Management’s index of non-manufacturing activity declined to 54.8 from 57.1 in September. Analysts had expected a smaller drop to 56.00.

Meanwhile, the non-manufacturing business activity index slipped to 57.7 from 60.3 the month before, reflecting growth for the 87th consecutive month, albeit at a slower rate.

The new orders index dropped to 57.7 from 60 in September, while the employment index fell to 53.1 from 57.2.

“There has been a slight cooling-off in the non-manufacturing sector month-over-month, indicating that last month’s increases weren’t sustainable. Respondents’ comments remain mostly positive about business conditions and the overall economy. Several comments were made about the uncertainty on the impact of the upcoming US presidential election,” the ISM said.

Capital Economics said the drop back in the ISM non-manufacturing index in October means that, despite the small rise in the ISM manufacturing index reported earlier this week, a weighted average of the two indices is consistent with GDP growth slowing to around 1.5% annualised over the rest of the year.