U.S. service sector activity slows in August: ISM survey

WASHINGTON (Reuters) - U.S. services industry growth slowed in August, likely as the boost from the reopening of businesses and fiscal stimulus faded.

The Institute for Supply Management (ISM) said on Thursday its non-manufacturing activity index fell to a reading of 56.9 last month from 58.1 in July. A reading above 50 indicates growth in the services sector, which accounts for more than two-thirds of U.S. economic activity. Economists polled by Reuters had forecast the index slipping to 57 in August.

The services sector has been hardest hit by the COVID-19 pandemic. Though new infections have declined, hot spots remain, causing some businesses to be closed again and reopening plans to be scaled back. At the same time, a $600 weekly unemployment supplement funded by the government expired on July 31.

The ISM survey’s measure of new orders for the services industry dropped to a reading of 56.8 last month after surging to a record 67.7 in July. But backlog orders increased and exports orders rebounded.

The survey’s index of services industry employment increased to a reading of 47.9 last month from 42.1 in July. Still, the continued contraction in the index buttresses economists’ expectations that employment growth slowed further in August.

According to a Reuters survey of economists, nonfarm payrolls likely increased by 1.4 million jobs last month after rising 1.763 million in July. That would leave nonfarm payrolls about 11.5 million below their pre-pandemic level.

The Labor Department is scheduled to release its closely watched employment report for August on Friday.

Reporting By Lucia Mutikani; Editing by Chizu Nomiyama