The U.
S. services sector resumed growth in October as output and new orders rose, while the labor market showed signs of easing contraction, signaling that the economy as a whole is largely experiencing a government shutdown and the administration's tariff wars.
The Services Purchasing Managers' Index (PMI) rose to 52.4 in October from 50 in September, the Institute for Supply Management (ISM) said on Wednesday. This marked the eighth month of growth this year for the largest segment of the economy and the strongest growth since February. The threshold between growth and contraction is 50.
"The higher figures for October provide some support for the notion that the government shutdown has a limited impact on the economy as a whole," Pantheon Macroeconomics said in a note. "We continue to believe that the weak labor market and, as a result, downward pressure on inflation in the core services sector means that further Fed policy easing is likely in the coming quarters."
The business activity/production index rose to 54.3 in October from 49.9 in September. The new orders index rose to 56.2 last month from 50.4. New export orders rose to 47.8, while imports declined to 43.7, with both figures declining.
The employment index stood at 48.2, showing a decrease in the rate of contraction from 47.2 in the previous month.
The private ISM survey is one of the few economic surveys or reports that provide insight into the state of the U.
S. economy, as most government data has been unavailable since the partial government shutdown began on October 1.
An ISM survey conducted at the factory reported on November 3 that the manufacturing price index stood at 48.7, marking the eighth month of contraction.
The price index for services, published on Wednesday, rose to 70 in October, reaching or exceeding that threshold for the first time since October 2022.
"Tariffs probably raise costs for some service companies, but for most of them, imported goods account for a relatively small share of total costs," says the Pantheon Macroeconomics report.
The survey respondents continued to "mention the impact of tariffs on prices paid," according to ISM. "There were no signs of mass layoffs or cuts in force, but the federal government shutdown was mentioned several times as affecting business activity and raising concerns about future layoffs."
A separate report released Wednesday by payroll service ADP showed that 42,000 jobs were created in the U.
S. private sector in October, the first increase since July, as originally reported.
