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Growth in services sector slowed in August from record pace

A host stands near a sign written in Spanish looking for dishwashers and cooks in Miami on July 14, 2021. Growth in the services sector, where most Americans work, slowed in August.  (Associated Press)
By Martin Crutsinger Associated Press Associated Press

WASHINGTON – Growth in the services sector, where most Americans work, slowed in August after setting a record pace in July.

The Institute for Supply Management reported Friday that its monthly survey of service industries decreased to a reading of 61.7 in August after hitting a record high of 64.1 in July.

The July figure was the fastest pace since this data series began in 2008.

Any reading above 50 indicates growth in service industries.

The services index has shown growth for the past 15 months after two months of contraction in April and May of last year when the coronavirus was triggering widespread shutdowns and the loss of millions of jobs.

Anthony Nieves, chair of the ISM services survey panel, said that services businesses were still facing difficulties navigating supply chain disruptions and labor shortages.

He said while the survey found that price pressures had eased a bit, the inflation index remained at a high level as did the index gauging delays in shipments of supplies.

“The tight labor market, materials shortages, inflation and logistics issues continue to cause capacity constraints,” Nieves said.

Of the 18 service sectors surveyed, 17 reported growth in August, led by accommodations and food services, an industry that was hit hard by the pandemic.

The only industry reporting a decrease in growth in August was arts, entertainment and recreation, a sector that includes amusement parks and movie theaters, an area that could have seen lower demand because of the rise in cases of the delta variant.

Kathy Bostjancic, chief U.S. financial economist for Oxford Economics, said that the service sector should continue to improve in the second half of this year, reflecting strong pent-up demand.

“We do not see the service-side recovery derailed especially as vaccine rates have risen,” she said.

On Wednesday, the ISM said that its survey of manufacturing industries increased in August to a reading of 59.9.

But the survey found that manufacturers were continuing to struggle to meet surging demand while at the same time dealing with numerous supply chain disruptions and a shortage of factory workers.

In a separate report Friday, the Labor Department said that employers added just 235,000 jobs in August, far below expectations and an indication that the spread of the delta variant was causing consumer cutbacks in such activities as shopping and eating out.