US services sector activity cools a little in August

The pace of services sector activity in the States ebbed a bit last month, as the rate of incoming new orders slowed, the results of a closely-watched survey showed.

The Institute for Supply Management's services Purchasing Managers' Index slipped from July's print of 58.1 to 56.9 (consensus: 57.2).

Driving the decline was a slump in the sub-index for new orders from 67.7 to 56.8 and a retreat in the sub-index tracking business activity levels from 67.2 to 62.4.

Nonetheless, both sub-indices remained well above the 50.0 point threshhold which denotes a move from contraction into an expansion.

Price pressures increased alongside, with the sub-index linked to them rising from 57.6 to 64.2.

Sub-indices for employment and order backlogs also improved, although the former was only at 47.9, versus 42.1 in the month before.

Supplier delivery times meanwhile slowed, on the back of the continued rise in demand.

Comments by purchasing managers from the various sectors appeared to be mixed overall, although one executive from the Information sector reported signs that factories and distribution firms were ramping up from a blockbuster Christmas holiday season online.

The same manager also reported "hearing the other shoe is about to drop, probably in first quarter of 2021, on U.S.-China trade. 'Get out of China now' is resonating."

Commenting on Thursday's ISM reading, Ian Shepherdson at Pantheon Macroeconomics said: "Positive growth, but non-retail services activity is still hugely depressed by Covid."

He went on to add: "if the expiration of enhanced unemployment benefits pushes spending down - it’s too early to know - then the ISM services index will follow it down.

"Note too that like all diffusion indexes, the ISM tells us nothing about the level of activity relative to normal; it just captures rates of change. Services activity seems still to be rising, led by retail, but it remains far short of its pre-Covid level."