The Services Purchasing Managers’ Index hit a record high in October at 66.7%, 4.8 percentage points higher than in September, confirming the recent shift in consumption from goods to services that will last until the end of the year. A reading above 49.2% indicates expansion.
The surging overall index was driven by service business activities and new orders.
The surging overall index was driven by service business activities and new orders that also reached record highs on the month as demand showed no signs of slowing, the Institute for Supply Management said on Wednesday.
As with the manufacturing sector, and essentially the entire economy, strong demand continues to drive business growth in the service sector while supply constraints restrain that growth.
Across industries, survey respondents said that inventories and backlogs of orders remained a challenge.
But the concern over rising costs remained in the center as the price index gained momentum in October, rising to 82.9%—the highest since 2005—from 77.5% in the prior month.
Despite such growth, rising costs have cut into businesses’ profit margins; all 18 service industries reported increases in the price of materials and inputs.
We expect that the shift in spending on goods toward services will continue in the last months of the year, and will most likely go well into next year, especially into the summer months as concerns about COVID-19 subside.