US services sector sees record growth in October amid hiring challenge
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The US services sector posted strong growth in October despite persistent hiring challenge, the Institute for Supply Management (ISM) has reported.
The Services Purchasing Managers' Index (PMI) registered all-time high of 66.7 per cent, 4.8 percentage points above September's reading, according to the latest Services ISM Report on Business on Wednesday. Any reading above 50 per cent indicates the services sector is generally expanding.
The composite index, which eclipsed the previous record of 64.1 per cent in July, indicated growth for the 17th consecutive month after a two-month contraction in April and May 2020, the report noted. Previous records were set in May (64 per cent) and March (63.7 per cent).
"Activity has never been more fast-paced, demand shows no signs of slowing, prices show no signs of falling, good help is hard to find and the wait time for supplies is everlong," Tim Quinlan and Shannon Seery, Economists at Wells Fargo Securities, said in an analysis.
The Business Activity Index reached 69.8 per cent, an increase of 7.5 percentage points compared to the reading in September, and the New Orders Index hit 69.7 per cent, up 6.2 percentage points from October figure, which both set all-time high, the ISM report showed.
Demand shows no signs of slowing, reflected by the Backlog of Orders Index, which set a record of 67.3 per cent, 5.4 percentage points higher than the September reading, and the Prices Index, which reached its second-highest reading ever at 82.9 per cent, up 5.4 percentage points from the September figure, according to the report.
"In response, services businesses are struggling to stock up," as the Inventories Index 42.2 per cent, down 3.9 percentage points from September's reading, said Anthony Nieves, Chair of the ISM's Services Business Survey Committee.
Quinlan and Seery noted that businesses continue to face "persistent labor challenges," as exhibited by the decline in the ISM services employment component to a four-month low of 51.6.
This is "contradictory" to this morning's separately reported data by payroll data company Automatic Data Processing (ADP) that private sector employment rose by a better-than-expected 5,71,000 in October with service-provider employment up 4,58,000, or the most since June, according to Quinlan and Seery.
"The primary challenge to the labor market's recovery continues to be the supply of workers," they added.
