US Services Sector Activity Jumps in October

WASHINGTON, Nov 5 (Reuters) – Activity in the U.S. services sector unexpectedly accelerated in October to a more than two-year high and employment strengthened, further evidence that the economy is in good shape as the country heads to the polls to choose next president.

The Institute for Supply Management (ISM) said Tuesday that its non-manufacturing purchasing managers’ index (PMI) accelerated to 56.0 last month from 54.9 in the previous month. This was the highest level since August 2022.

Economists polled by Reuters had forecast a decline in the services PMI to 53.8.

A PMI reading above 50 indicates growth in the services sector, which accounts for more than two-thirds of the economy. The ISM believes that PMI readings above 49 over time generally indicate an expansion of the overall economy.

The report comes on a day when Americans are choosing between Democratic Vice President Kamala Harris and former Republican President Donald Trump as the next occupant of the White House.

Polls suggest a close race may depend on voters’ views of the economy, where high prices remain a persistent problem for families even as inflation itself has returned to near-normal levels, unemployment remains low and the Federal Reserve has begun cutting interest rates. rates to keep it that way.

The Fed is expected to cut rates again on Thursday, this time by a quarter percentage point to a range of 4.50%-4.75%.

The rate was cut by half a percentage point in September, but generally upbeat economic data since then, including annual gross domestic product growth of 2.8% in the third quarter and strong consumer spending, point to the possibility of further rate cuts. big cuts are on the back burner.

New orders in the ISM survey fell to 57.4 in October from 59.4 in September. The ISM price measure of service costs fell to 58.1 from the previous month’s eight-month high of 59.4.

The ISM service employment rate rose to 53.0 in October from 48.1 in September, signaling stronger job growth.

The data is at odds with a Labor Department report released last Friday that said employers sharply slowed hiring last month, adding just 12,000 jobs.

The report was widely seen as overstating labor market weakness, given the ongoing Boeing strike that has led to manufacturing job cuts and a pair of hurricanes that have thrown more than half a million people out of work.

But it also contained evidence that working conditions had become colder. The three-month average monthly job gain is now 104,000, below what is needed to keep pace with population growth, and while the unemployment rate remained stable at 4.1%, this was largely because everyone more people left the workforce.

Reporting by Anne Sapphire; Editing: Chizu Nomiyama