August Non-Manufacturing Activity Slowed

Date: September 07, 2016 Last Edit: September 08, 2016

ISM Non-Manufacturing Index Falls To Lowest Level Since 2010

According to the Institute of Supply Management’s latest non-manufacturing index data, US services activity “slowed to a 6-1/2-year low” in August as ISM’s non-manufacturing index fell 4.1 percentage points to 51.4 “amid sharp drops in production and orders,” Reuters says. Reuters suggests this points “to slowing economic growth that further diminished prospects for an interest rate hike from the Federal Reserve this month.” The drop from July “was the largest monthly fall since the 2008 financial crisis, with the ISM saying a majority of companies had noted a slowing in their level of business.” Despite slower growth, the AP notes that an above-50 reading means services firms “have now expanded for 79 straight months.” New orders and hiring “grew more slowly in August,” while export orders fell. Amherst Pierpont Securities Chief Economist Stephen Stanley “said the report is the latest that shows the economy was ‘noticeably weaker than expected’ in August.” He added the ISM services reading “gives the Federal Reserve another reason to delay an interest rate increase at its September meeting.”

What This Means For Small Businesses

The services sector has historically seen a more robust recovery since the recession. This makes the latest ISM non-manufacturing index decline more worrisome, as it could signal a cooling of the overall economy. In such a turbulent economy, small businesses bear the brunt of uncertainty. As NFIB Chief Economist William Dunkelberg pointed out in the latest Small Business Economic Trends report, “Uncertainty is high, expectations for better business conditions are low, and future business investments look weak. Our data indicates that there is little hope for a surge in the small business sector anytime soon.”

Additional Reading

Bloomberg News also covers the latest ISM non-manufacturing index data.

Note: this article is intended to keep small business owners up on the latest news. It does not necessarily represent the policy stances of NFIB.

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