- U.S. Non-Manufacturing Sector Rises to 12-Year High
U.S. non-manufacturing sector expanded in September at the fastest pace in 12 years, following two hurricanes.
The non-manufacturing index rose to 59.8, according to the Institute for Supply Management report published on Wednesday. Up from 55.3 and the highest since August 2005. A reading above 50 indicates expansion.
Also, new orders advanced to a 5-month high of 63 from 57.1 in August. While the gauge of employment in the sector climbed to 56.8 from 56.2 in August. The strongest since May.
This, combined with the 13-year high manufacturing growth reported on Monday indicates growth is broad-based and that hurricanes impact will be minimal on third-quarter growth.
“We have to at least entertain the notion that an economy that was already in pretty solid shape cyclically is picking up momentum heading into the fall,” said Stephen Stanley, chief economist at Amherst Pierpont Securities.
The services sector which contributes about 80 percent of US Gross Domestic Product, reinforces the view that the US economic recovery remains on track for the second half of the year.
The better than expected economic figures will further strengthen Federal Reserve position on monetary stance and boost business confidence ahead of balance sheet normalization.
While strong economic growth backed by the healthy labor market and growing consumer spending is aiding Fed position, sluggish wage growth and weak inflation remain a concern.
The US dollar was largely unchanged due to the US uncertainties, especially the Fed chair replacement process.
Meanwhile, U.S. private businesses added 135,000 jobs in September, the ADP National Employment Report showed on Wednesday. While this is the smallest gain since October 2016, it is better than the 125,000 jobs expected by economists.
According to the report, small retailers were more affected by the Hurricanes.