US services sector growth accelerates

A measure of US services industry activity jumped to a record high in July, boosted by the shift in spending to services from goods, but businesses continued to pay higher prices for inputs because of supply constraints.

The Institute for Supply Management survey on Wednesday also showed a rebound in a gauge of services industry employment last month. That eased worries of a sharp slowdown in job growth, which had been stoked by the ADP Employment Report showing the smallest gain in private payrolls in five months in July.

The bounce back in the ISM services employment index followed a similar reading for the manufacturing sector. The economy is pushing ahead after fully recovering in the second quarter the sharp loss in output suffered during the very brief Covid-19 pandemic recession.

“For months, employers have struggled to find labour and employment numbers have been held down from the worker side rather than a lack of demand from companies,” said Chris Low, chief economist at FHN Financial in New York. “These increases bode well for Friday’s employment report. ADP has not been very useful this year.”