ECONOMIC NEWS: Strength in the Service Sector

By at 3 September, 2020, 3:52 pm

by Raymond J. Keating-

As an economist who is an optimist at heart, it’s encouraging to highlight a positive report in the midst of this pandemic economy. The IHS Markit U.S. Services PMI reported “a strong expansion in business activity across the U.S. service sector, as output rose at the sharpest rate for nearly one and a half years.”

The report noted reasons behind the uptick: “The upturn was driven by greater client demand, as new orders grew at the quickest pace for over a year. As a result, firms increased their workforce numbers sharply to cope with greater pressure on capacity. Although business expectations ticked down slightly, firms remained optimistic on balance, with sentiment regarding the year ahead at its second-highest since April 2019.”

The August index came in 55.0, which was up notably from July’s 50.0. The index had plunged in February, March and April – registering an all-time low of 26.7 in April.

Chris Williamson, Chief Business Economist at IHS Markit, ably summed up matters:

“Combined with the stronger picture emerging from manufacturing in August, the improved performance of the vast service sector adds to signs that the third quarter will see an impressive rebound in the economy from the collapse seen in the second quarter. However, the survey also highlights how the rebound is very uneven and the recovery path remains highly uncertain.”

Finally, it also should be noted that service providers were positive looking ahead:

“Finally, service providers registered a solid degree of confidence with regards to the outlook for output over the coming year in August. Optimism was often linked to hopes of a further pick up in client demand and a recovery in economic performance.”

Wow, given the many uncertainties moving forward, writing about a positive development in the economy felt good!

Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.


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