Strong Growth in Services Sector Tempered by Supply Concerns

By at 5 October, 2021, 8:08 pm


The latest assessments of the services sector of the U.S. economy from purchasing managers point to strong growth, tempered by ongoing supply chain worries and challenges.

The Institute for Supply Management Services PMI report highlighted strong and improving growth. Anthony Nieves, chair of the Institute for Supply Management Services Business Survey Committee, noted that all “17 services industries reported growth. The composite index indicated growth for the 16th consecutive month after a two-month contraction in April and May 2020. The slight uptick in the rate of expansion in the month of September continued the current period of strong growth for the services sector.”

But he also noted that “ongoing challenges with labor resources, logistics, and materials are affecting the continuity of supply.”

In fact, highlighted quotes from respondents noted that supply chain problems were on the rise.

Meanwhile, the IHS Markit U.S. Services PMI report also noted strong growth, though slowing some, as well as supply issues.

In fact, it was noted that “pressure on capacity was reflected in the sharpest rise in backlogs of work since data collection began almost 12 years ago. Challenges expanding workforce numbers reportedly exacerbated difficulties clearing incoming new business.”

Looking ahead, Chris Williamson, chief business economist at IHS Markit, said, “With COVID-19 cases numbers appearing to have peaked early in September, the situation in terms of demand
and labor supply should start to improve as we head into the fourth quarter; a sentiment supported by business optimism rising in the service sector to the highest since June and an unprecedented strong build-up of back orders.”

Let’s hope that this outlook holds true.

But additional concerns cloud the future beyond the pandemic. Specifically, policies being pushed in Washington, D.C. that are harmful to entrepreneurs, investment and businesses in general. Destructive tax and regulatory policies, big government spending increases, and trade policies that raise costs and restrict expansion opportunities work against recovery and growth, and make it more difficult for businesses to navigate existing supply chain challenges.

Our economy needs to see entrepreneurship, small business and investment re-energized, with wages, salaries and employment benefitting accordingly. This will require the woes of pandemic being left behind, and policymaking being shifted in a pro-business, pro-growth direction.

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


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