US services sector activity growth cools in November: survey

WASHINGTON: Activity in the US services sector grew more slowly in November, on the back of cooling in areas like business activity, new orders and employment, survey data showed Wednesday, while businesses eyed potential new tariffs.

Last month, the Institute for Supply Management’s (ISM) services index ticked down to 52.1 per cent, from 56 per cent in October.But the figure still indicates that activity in the sector is expanding -- growing for a fifth straight month.

“Fourteen industries reported business activity growth, and 13 indicated new orders expansion; both figures are improvements compared to October,” said ISM survey chair Steve Miller.

“This reinforces the view over the last several months that the services sector has returned to sustained growth,” he added in a statement.But Miller noted that survey respondents flagged the ramifications of this year’s US presidential election, which will see Republican Donald Trump return to the White House in January.

“Tariffs were mentioned often, with cautionary outlooks related to the potential impact on respondents’ specific industries,” he said.Matthew Martin, senior economist at Oxford Economics, said the overall reading does not affect his expectation that consumers will keep spending, especially on services.

This will “keep the economy humming along,” he added in a note. But he warned that even though the Federal Reserve will not decide on interest rate changes based on shifts in trade policy that have yet to come, “tariffs will inevitably complicate matters”.

Among different areas in the ISM’s report on Wednesday, the business activity index was lower at 53.7 per cent in November, from 57.2 per cent in October.Similarly, the employment index edged down to 51.5 per cent and the new orders index moved lower to 53.7 per cent, the ISM report said.

“Federal Reserve interest rate cuts have not had the desired effect on mortgage rates yet,” noted an anonymous respondent in the construction sector.“With election results mostly determined, expansion of residential construction is anticipated, but the unknown effect of tariffs clouds the future,” the respondent added.