A key gauge of service sector activity showed that growth in much of the economy nearly came to a halt in August, detracting from a better-than-forecast rise in private-sector employment.
The ISM Non-Manufacturing Index slowed from 54.3 in July to 51.5 last month, well below the consensus forecast offered by Bloomberg News of 53.0 and below the bottom end of the range that ran from 52.0 to 54.3. A reading of 50 suggests that the service sector, which makes up a majority of economic activity, is neither expanding nor contracting.
Weakness was broad-based, as nearly every category gave up ground. And at 51.5, the index stands at its lowest reading since January, when it began a string of 50+ readings that indicated the economy was beginning to move forward.
But data have been mixed lately. Housing has been under pressure and jobless claims are still too high. But consumers have been a little less stingy with purchases and manufacturing growth has accelerated.
The increase in jobs last month is taking a little bit of pressure off the Fed, but today’s reading on service industries is likely to get noticed by central bankers.
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