US Service Sector Expands in August at Fastest Pace in Six Months

The US service sector expanded in August at its fastest pace in six months, driven by strong demand and a pickup in business activity. The Institute for Supply Management’s services index rose 1.3 points to 55.4, the highest level since February. New orders growth accelerated to the fastest pace since early 2023, while a measure of business activity was the strongest since 2022. However, employment contracted for the fifth time in six months, and prices paid climbed to a mid-2022 high. Twelve services industries reported growth, including mining, real estate, and food services, while five industries reported contraction. The sector has been helped by resilient consumer spending, a stable job market, and healthy business investment, but has also faced supply chain disruptions, tariffs, and rising costs. ISM’s measure of prices paid for materials and services climbed to 72.6 in August, the highest since mid-2022, with petroleum-related products, diesel, and gasoline reported as up in price. Graphics processing units and steel were also in short supply.