Recent data shows that spending on services is keeping the American economy afloat.
The services sector grew for the second month in a row in August. In August, the indicator reached its highest point in four months. A reading greater than 50% means expansion.
Survey responses show a booming services sector as companies benefit from a decrease in inflation. Business is growing for executives in a wide range of areas. Agriculture, forestry, fishing and hunting, and arts, entertainment and recreation were the only sectors that didn't get contracts.
One survey participant said that they were starting to see some cost pressures relief. There is a healthy supply environment.
The trend is underscored by other data. The Bureau of Economic Analysis released a report a couple of weeks ago that showed a slight increase in spending on services.
The services sector may not be as strong as the ISM data suggests. A contraction was shown in another measure of activity in the area. The S&P services index fell to 43.7 in August from 47.3 in July. Ken Kim said that the ISM index is more closely watched by economists.
The services sector is helping the US weather the global economic downturn. The risk of the US falling into a recession is lower than in China or Germany.
The ISM data adds to a mixed economic picture that will make it difficult for the Fed to set interest rates. The labor market is still strong even though inflation has slowed.
Good news for recession watchers is bad news for inflation hawks The Fed expects prices for everything from rent to healthcare to increase as the service sector recovers from its collapse.
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