September expansion is 16th straight for US service sector

SILVER SPRING, Md. (AP) — The U.S. services sector, where most Americans work, grew again in September even as supply chain troubles persisted.

The Institute for Supply Management reported Tuesday that its monthly survey of service industries rose to a reading of 61.9, following August’s reading of 61.7. The gauge hit a record high of 64.1 in July. The July figure was the fastest pace since this data series began in 2008.

Any reading above 50 indicates growth in service industries. The services index has shown growth for the past 16 months after two months of contraction in April and May of 2020 when the coronavirus triggered widespread shutdowns and millions of job losses.

Of the 18 service sectors surveyed, 17 reported growth in September, led by retail trade. The only one that contracted was the agriculture, forestry, hunting and fishing sector.

Economists expect strength in the service sector to continue in the second half of this year, reflecting pent-up demand. But businesses are struggling to keep up with that demand due to supply chain problems and transportation delays.

“The slight uptick in the rate of expansion in the month of September continued the current period of strong growth for the services sector,” said Anthony Nieves, chair of the ISM services survey panel. “However, ongoing challenges with labor resources, logistics, and materials are affecting the continuity of supply.”

As demand has outpaced supply, businesses have had to dip into inventories, which contracted for the fourth straight month. Order backlogs also increased at a faster pace and prices for nearly everything continue to climb.

On Friday, the ISM said its survey of manufacturing industries accelerated last month to the highest level since May, despite global supply chain disruptions.