Services from education to health care to restaurants make up two-thirds of the US economy and continued to grow in August 2022

U.S. service sector expanded in August as prices fall: survey

Services from education to healthcare to restaurants make up two-thirds of the US economy and continue to grow in August 2022 – Copyright AFP Wojtek RADWANSKI

The U.S. services sector expanded slightly faster in August on signs of easing supply concerns and slowing price growth, according to an industry survey released on Tuesday.

The Supply Management Institute’s services index rose to 56.9 percent, only slightly higher than in July, contrary to slowdown expectations.

The new orders index jumped 1.9 percentage points and employment rose 1.1 points, ISM said, while prices fell 0.8.

“The services sector saw a slight uptick in August due to increased business activity, new orders and employment,” ISM Chairman Anthony Nieves said in a statement.

Firms that responded to the survey noted “some improvements in supply chain, logistics and costs; however, material shortages remain a problem,” he said.

On the positive side, “employment has improved slightly despite the tight job market.”

This sector accounts for two-thirds of the US economy and includes a wide range of services, from education to information technology and medicine.

Even with US inflation skyrocketing, the sector has grown steadily for 151 months, except for a two-month contraction as the United States battled the onset of the coronavirus pandemic in April and May 2020.

On the contrary, growth in the manufacturing sector remained flat in August.

The Federal Reserve is aggressively fighting the highest U.S. inflation in four decades, fueled by global supply chain troubles, by raising interest rates to dampen demand.

Rubila Farooqi of High Frequency Economics said that despite the unexpected rise in the services sector, “the momentum is likely to be moderate as economic activity continues to adjust to the Fed’s rate hikes.”

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