WASHINGTON — The U.S. services sector showed solid growth in August, with the Institute for Supply Management (ISM) reporting its non‑manufacturing Purchasing Managers’ Index (PMI) climbing to 55.4, up from 54.1 in July. A reading above 50 signals expansion, and the current level suggests the economy is on a firm third‑quarter footing.
New orders surge on AI‑driven demand
ISM’s new‑orders component jumped to 60.9, the highest reading since February 2023, reflecting a surge in domestic demand that analysts attribute in part to a boom in artificial‑intelligence spending. This strong order flow underscores the importance of the services sector, which accounts for more than two‑thirds of U.S. economic activity.
Supply chains remain stretched, input costs rise
Despite the demand surge, supply‑chain pressures persisted. The supplier‑delivery index eased to 51.3 from 52.8, indicating slower deliveries for the 21st consecutive month. Higher input‑price pressures followed, with the prices‑paid index climbing to 72.6 from 70.3, suggesting inflation could stay above the Federal Reserve’s 2% target for some time.
Implications for Federal Reserve policy
Fed Chairman Kevin Warsh warned that the central bank will “have work to do” if inflation does not move decisively toward the 2% goal. Financial markets are pricing roughly a 64% chance that the Fed will raise its benchmark overnight rate by 25 basis points at its September 15‑16 meeting, keeping the target range at 3.50%‑3.75%.
Employment outlook remains cautious
While orders rose, the services‑sector employment sub‑index held steady at 47.8, indicating firms are hesitant to add staff amid policy uncertainty. Economists expect the Labor Department to report a rebound of about 56,000 jobs for August, though some caution that job growth could be muted after the recent expiration of Temporary Protected Status for many Haitian workers.
What this means for families and businesses
Strong service‑sector activity supports local businesses and households, but higher input costs could translate into higher prices for everyday goods and services. Parents and families should watch for potential price increases as the Fed navigates its next policy move.
Original reporting: Appleton, WI News Feed (HLL/CB) — read the source article.
