Growth in U.S. service sector activity accelerated to a new record high in the month of October, the Institute for Supply Management revealed in a report released on Wednesday.
The ISM said its services PMI climbed to 66.7 in October from 61.9 in September, with a reading above 50 indicating growth in the sector. Economists had expected the index to inch up to 62.0.
“In October, strong growth continued for the services sector, which has expanded for all but two of the last 141 months,” said Anthony Nieves, Chair of the ISM Services Business Survey Committee.
He added, “However, ongoing challenges — including supply chain disruptions and shortages of labor and materials — are constraining capacity and impacting overall business conditions.”
The much bigger than expected increase by the headline index came as the business activity index surged up to 69.8 in October from 62.3 in September and the new orders index jumped to 63.5 from 69.7.
On the other hand, the employment index fell to 51.6 in October from 53.0 in September, indicating a modest slowdown in the pace of job growth.
The ISM also said the supplier deliveries index shot up to 75.7 in October from 68.8 in September, with a reading of above 50 percent indicating slower deliveries.
The backlog of orders index also jumped to a record high 67.3 in October from 61.9 in September, while the prices index surged up to 82.9 from 77.5.
“Services will post solid gains into 2022, while stubborn supply-chain headwinds drag the recovery, but don’t strengthen enough to throw it off course,” said Oren Klachkin, Lead U.S. Economist at Oxford Economics.
He added, “Though policy makers and business leaders are working to unclog supply chains, it will take time to return to pre-Covid conditions.”
A separate report released by the ISM on Monday showed a modest slowdown in the pace of growth in U.S. manufacturing activity in the month of October.
The ISM said its manufacturing index edged down to 60.8 in October from 61.1 in September. Economists had expected the index to dip to 60.5.
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