We got two mixed reports on the US services sector on Wednesday.
But on balance, and relative to manufacturing, the sector is quite healthy.
Markit’s services purchasing manager’s index (PMI) was better than expected, at 54.8 for October. Economists had estimated a print of 54.5.
However, overall service-sector activity growth slowed to a four-month low, according to Markit. The report said that weaker client demand reduced growth expectations for year ahead, and companies became more cautious about hiring.
Service-sector employment rose at the slowest pace since February.
“The survey data also reinforce strong arguments — notably a continued absence of inflationary pressures — that there is no rush to tighten [monetary] policy,” said Markit chief economist Chris Williamson in the release. “Much will now depend on the November survey data, which will provide a reliable guide to business conditions in the fourth quarter.”
The Institute of Supply Management’s PMI came in better than expected, at 59.1 (56.5 estimated), and near the highest levels in a decade it reached in July.
According to ISM, the services sector continued to grow at a faster rate.
“After the slight cooling off in September, the non-manufacturing sector reflected growth across most of the indexes,” ISM said in its report. “Respondents remain mostly positive about business conditions and the overall economy.”
The strong dollar and low commodity prices have hammered the manufacturing sector this year. But not so much services, which contributes about five-and-a-half times more more to Gross Domestic Product, noted Pantheon Macroeconomics’ Ian Shepherdson to clients.
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