Growth in the US service sector slowed to a six-year low in August, according to the Institute of Supply Management. The monthly non-manufacturing purchasing manager's index on the service sector came in at 51.4 for August. That's the lowest reading since February 2010, when the index pulled out of contractionary territory for good following the Great Recession.
The index is still above 50, indicating that the service sector remains in expansion. Economists had forecast that the PMI slipped to 55 from 55.5 in July, according to Bloomberg. The service sector, which includes occupations ranging from teaching to therapy, contributes to most of the US economy's growth and job creation. According to ISM, employment fell from the prior month, as the majority of survey respondents said business activity was slowing down.
Markit Economics released its monthly report on Saturday. It showed that business activity slowed to a six-month low in August. Their headline PMI dropped to 51 from 51.4. Employment grew at the weakest pace since December 2014, and survey respondents told Markit that client demand for their services was quite subdued. "Taken together, the manufacturing and services PMIs are pointing to an annualized GDP growth rate of a mere 1%, similar to the subdued pace signaled by the surveys throughout the year to date, suggesting that those looking for a strengthening in the rate of economic growth will be disappointed once again," said Chris Williamson, Markit's chief economist, in the release.
Because Markit and ISM don't necessarily talk to all the same people or use the same survey methods, the results of their indexes often differ. In August, however, both surveys showed a slowdown in the US economy's most important sector. - Akin Oyedele