US service sector growth slows

The non-manufacturing sector in the United States grew at its slowest pace since February 2010 in August

US service sector worker
A cashier at a checkout in Wal-Mart. The Institute of Supply Management Non-Manufacturing Index measures firms in service sector industries such as retail, finance and healthcare 

The service sector in the US saw its slowest pace of growth in six years, according to the latest data from the Institute of Supply Management (ISM) Non-Manufacturing Index. The index, measuring firms in the service sector (including retail, finance and healthcare), fell from 55.5 percentage points in July, to 51.4 in August – representing a 4.1 percent dip.

While any reading above 50 signals growth, the composite figure of 51.4 is much lower than had been expected. Such slow growth in the service sector has not been seen since February 2010. Based on previous expansion, economists had predicted a higher score, closer to July’s figures.

The ISM Non-Manufacturing Index fell from 55.5 percentage points in July, to 51.4 in August

The index is based on a survey of over 375 service sector firms and has four major components: business activity, new orders, employment, and supplier deliveries. The index’s business activity figure saw a substantial decline in growth from the month prior, down to 51.8 percent from July’s 59.3. The index measuring new orders fell by 8.9 percent, to 51.4, while the employment index eased down to from 51.4 in July to 50.7 in August. Supplier delivery growth rose by 0.5 percent.

This slowed growth raises some cause for concern for the US economy; the weak growth measured in the index comes on the tail of August’s disappointing jobs report, which showed only a modest expansion of jobs. Whether or not the US economy is facing weakened overall growth in the third quarter of 2016 remains unclear, but the latest figures will perhaps dampen the prospects of a federal rate rise in September.