US Service Sector Hits Six-Month Growth High in August

The Institute for Supply Management reported that the US service sector expanded in August at its fastest pace in six months, with the services PMI rising to 55.4 from 54.1 in July. This growth exceeded economist expectations of 54.3 and was driven by a surge in the new orders index to 60.9 and a business activity index increase to 61.7, the latter reaching its highest reading since November 2022.

While twelve industries reported growth, including real estate and mining, the sector faced significant cost headwinds. The prices index jumped to 72.6, the highest level since August 2022, fueled by rising costs for gasoline, diesel, and petroleum products. Business leaders attributed these price spikes to administration tariffs and the conflict in Iran.

Despite the activity expansion, the employment gauge remained a point of weakness. The employment index fell to 47.8, marking a second consecutive month of contraction and signaling a decline in five of the last six months. In contrast to the service sector's acceleration, a separate report indicated a modest slowdown in US manufacturing activity, with the manufacturing PMI dipping to 54.6 in August from 55.6 in July.