Services sector expanded at stronger rate in August

Associated Press

WASHINGTON

U.S. service businesses grew at a faster pace in August as measures for new orders and hiring improved, though some of those gains could disappear temporarily in the wake of damage from Harvey.

The Institute for Supply Management said Wednesday that its services index rose in August to 55.3 from 53.9 in July. The July reading had been the lowest since the index registered 51.7 in August 2016. Still, anything above 50 signals growth. The services sector has expanded for 92 straight months.

The gains in hiring, new orders and production point to continued economic growth. Anthony Nieves, chair of ISM’s nonmanufacturing survey committee, says the current reading corresponds with annual economic growth of about 2.5 percent.

But those gains could drop off due to short-term setbacks caused by Harvey and, possibly, Irma, said Ian Shepherdson, chief economist at Pantheon Macroeconomics.

After Hurricane Katrina struck in 2005, the services index and its hiring component both fell.

“We tentatively expect bigger declines this time around, but the key point for now is that ahead of the storms, the nonmanufacturing sector was in good shape,” Shepherdson said.