Service sector activity slowed in the United States during September, with strong domestic demand continuing to pressure supply chains and push up corporate input prices, in a sign that inflation may remain high until next year.
The Institute for Supply Management (ISM) announced on Monday that the purchasing managers index for the non-manufacturing sector fell to 54.9 points in September, from 55.4 points in August, compared to expectations of 55.2 points. A reading above 50 points indicates growth in activity, while the services sector represents more than two-thirds of US economic activity.
Despite the decline, the index remained consistent with strong economic growth during the third quarter, driven by solid domestic demand, especially consumer spending and corporate investments in artificial intelligence and related infrastructure.
The new orders index fell to 59.8 points from 60.9 points in August, but remained at a high level. On the other hand, the supplier delivery index rose to 53.2 points from 51.3 points, a reading that means a slowdown in deliveries for the twenty-second month in a row.
The index of prices paid by service companies for inputs jumped to 74 points from 72.6 points, an increase that reflects growing pressures on companies’ costs. The increase was consistent with a similar rise in the price index in the ISM survey of the manufacturing sector.
Reuters said that the two surveys together indicate the possibility of rising inflation in the coming period, which supports economists’ expectations that the Federal Reserve will raise interest rates in December.
Supply chains are having difficulty keeping up with strong demand, while the war in the Middle East has increased pressure by raising energy prices and causing shortages of some goods that pass through the Strait of Hormuz.
Diesel prices have reached record levels, which, according to economists, may lead to pressures being transferred to sectors beyond transportation and agriculture.
In the labor market, the employment index in the services sector rose to 50.1 points in September from 47.8 points in August, indicating a relative improvement in employment activity.
On the other hand, the “optimistic” official aspirations in Lebanon regarding the imminent conclusion of the initial agreement with the International Monetary Fund have turned into the reality of “waiting” with no specific time, awaiting the issuance of the Constitutional Council’s decision regarding the appeal submitted by the President of the Republic, Joseph Aoun, to Article Three of the Banking Reform Law.
It is no secret, according to a concerned financial official, that the difference in visions between the authorities automatically reflects part of the facts of the ongoing political and sectoral conflict in determining the authority “authorized” to manage the bank restructuring process.
The response by a spokeswoman for the Fund’s management, following the disclosure of the presidential appeal, contained a veiled reference to linking the conclusion of the initial agreement to the desired reform package, which includes “the entry into force of the law to address the conditions of banks,” in addition to approving appropriate laws to address the financial gap.
Indeed, the delegation’s financial tour, headed by Prime Minister Nawaf Salam and Finance Minister Yasser Jaber, recorded qualitative progress, according to the financial official, in terms of convincing the fund management of the possibility of signing the second version of the initial agreement with Lebanon before the end of this year.
Thus, the new “appeal” reflects some features of the ongoing confrontation, and the fact that there is a political “gap” at the governmental and parliamentary levels, and likewise within the financial sector, with regard to policies and treatments for approving clear legislation to address and distribute financial losses.
