The service sector of the U.S. economy grew again in August, but the pace slowed down because of higher interest rates, slower sales, and fewer customers. This was found in a new poll.
The Institute for Supply Management said that a measure of service businesses went up one point, from 51.4% in July to 51.5% last month. People think that numbers over 50% are good for the business.
It has been stuck in a tight range since the spring, which shows that the economy has slowed down.
Steve Miller, who led the survey, said, “Slow to moderate growth was seen across many industries.”
The Wall Street Journal asked economists and found that they thought the reading would be 51.0%.
A similar ISM poll of American makers found worse things. It went down for the fifth month in a row, which suggests that it won’t get better until after the election.
High interest rates on loans have hurt manufacturers more than service-based businesses.
Key details:
- The new-orders index rose 0.6 points to 53.0%.
- The production gauge fell 1.2 points to 53.3%.
- The employment barometer slipped 0.9 points to 50.2%, a relatively weak result.
- The prices-paid index, a measure of inflation, increased slightly to 57.3%.
Big Picture: The U.S. economy has been driven by services for the past few years, but high interest rates and rising prices have put a strain on this sector.
The yearly rate of inflation is back to levels that were low before the pandemic, which is good news. The Federal Reserve is also ready to start lowering interest rates in a few weeks. Lower interest rates on loans could increase sales, lead to more jobs, and help the economy grow.
In the future: “Demand for services is slowly falling, but new orders and production have continued to grow into the third quarter,” said Ben Ayers, a senior economist at Nationwide.
“Still, there are signs that people are cutting back more as the autumn season approaches, which could bring services closer to shrinking later this year.”
