Growth in the US services sector, a key driver of the American economy, hit a 12-year high last month in the wake of back-to-back hurricanes, a survey released today showed.
The monthly gains surpassed analyst expectations and marked 93 consecutive months of expansion, according to the Institute for Supply Management.
ISM’s non-manufacturing index rose a strong 4.5 percentage points from August’s level to reach 59.8 per cent.
A reading above 50 percent indicates growth. Analysts had predicted that September’s result would be the same as those from August.
The September reading was the highest since August of 2005, when the index hit 61.3 per cent. Hurricane Katrina wrought destruction in New Orleans at the end of that month.
Analysts said Wednesday that rising chain store sales and deliveries in advance of the hurricanes had helped explain some of September’s bounce.
The business activity index rose 3.8 points to 61.3 per cent, the new orders index spiked by 5.9 points to 63 per cent and the employment index nudged up 0.6 points to 58.6 per cent.
According to the survey, 15 of 17 service industries reported growth, including retail, construction and financial services.
Meanwhile, the mining sector, as well as arts and entertainment, reported contraction.
The indices for supplier deliveries jumped 7.5 per cent and prices showed an 8.4 per cent gain.
Most industries did not report disruption from hurricanes Harvey and Irma, except for hospitality and food services, as well as professional, scientific and technical services.
“Hurricane Harvey has been a disruption to normal business activity in the oil and gas industry,” a respondent in the professional, scientific and technical services category told the survey.
“Refineries and petrochemical plants were shut down due to the storm, as were many offices along the Gulf Coast. Business is just now returning to some sense of normalcy.” According to Jim O’Sullivan of High Frequency Economics, the ISM survey has not been accurate recently in predicting quarterly GDP growth.
“The index has been overstating the trend in growth recently but there is certainly no sign in these data of the economy weakening,” he said in a research note.
“Indeed, they suggest strengthening.”