TEMPE, Arizona: In August, the U.S. services sector unexpectedly gained momentum, with new orders rising and businesses paying higher prices for inputs.
These gains are potential signs of ongoing inflation pressures.
This week, the Institute for Supply Management (ISM) said that in August, its non-manufacturing PMI rose to 54.5, the highest level since February and up from 52.7 in July.
A reading of more than 50 indicates growth in the services industry, which accounts for more than two-thirds of the U.S. economy.
A Reuters poll of economists forecast that non-manufacturing PMI will decline to 52.5, and no respondents predicted a reading of more than 53.9.
To curb inflation, the Federal Reserve has raised its policy rate by 5.25 percentage points over the past year and a half, and in recent months there have been signs that higher borrowing costs are starting to have the desired effect.
Data published last week showed that inflation measured by the personal consumption expenditures (PCE) price index, the Fed’s preferred measure, rose by 3.3 percent in July from a year earlier, down from a high of seven percent last summer.
A Labor Department report released on September 1 also showed that monthly job growth has averaged some 150,000 over the past three months, down sharply from 238,000 in the three months through May.
Last week, the ISM also reported that its manufacturing PMI contracted in August for the tenth consecutive month.
These signs of cooling have increased expectations that the U.S. central bank will maintain its policy rate or even lower it at its meeting later in September.
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