Despite broader growth concerns, service sector improves

Wells Fargo Research Team Wells Fargo

Summary

The services ISM notched a modest gain in August, quelling for now concerns about stalling growth. While the prices paid measure rose, the employment measure indicates a jobs market that is in a decidedly lower gear than it was as recently as earlier this year.

ISM rises to three-month high

A run of lousy jobs market data has put the once all-but-assured soft landing in doubt, and while the services sector is not immune to the soft labor signals, activity there remains in good shape. In fact, it's improving. The ISM services index rose modestly to 51.5 in August, and while service-providers also face their fair share of challenges today, activity in the sector is merely moderating rather than declining as it is in wide swaths of manufacturing. That is giving way to a degree of measured...dare we say? optimism. (chart).

The select industry comments from purchasing manager respondents included mention of business being stable, good, strong or improving. Some others referenced high borrowing costs and elevated costs weighing on business activity, but the report remains consistent with an expanding sector, which quells some fear of stalling growth, for now.

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Wells Fargo Research Team

Wells Fargo

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