The ISM services index fell to 51.4 in August from 55.5 the month before, missing expectations for a reading of 55.0 and hitting its lowest level since February 2010. That’s the lowest reading since February 2010, when the index pulled out of contractionary territory for good following the Great Recession.
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The index is still above 50, indicating that the service sector remains in expansion.
While a reading above 50 indicates continued growth in the service sector, economists had expected the index to show a much more modest drop to 55.0. Its services survey covers businesses that employ the vast majority of workers, including retail, construction, health care and financial companies. He said it was too early to gauge whether a sustained slowdown had arrived, but he noted that last month’s growth rate was “not a sustainable level”.
The pound has surged to a new two-month high against the dollar after a crucial indicator of activity in the USA economy has crashed, raising yet more question marks over the timing of the next interest rate rise.
Meanwhile, the employment index fell to 50.7 in August from July’s 51.4.
Measures of orders and business activity skidded by the most since 2008, when the US was in a recession, and an employment index moved closer to stagnation.
Services companies have continued to grow despite a less-than-stellar US economy.
11 of the industries reported growth for the month, while seven reported a contraction. Manufacturing and mining shed jobs over the month.
Expectations for a rate hike have moderated since the miss in non-farm payrolls on Friday and the weak ISM manufacturing index last week.
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A separate measure of service-sector activity from private data provider Markit released earlier Tuesday showed its services purchasing managers index fell to 51.0 in August, a six-month low, from 51.4 in July.
