The U.S. non-manufacturing sector experienced a significant rebound in August, according to the latest report from the Institute for Supply Management (ISM). The Non-Manufacturing Index (NMI) rose sharply to 56.4, marking a 2.7 percentage point increase from July's 53.7 and signaling robust expansion in service-based industries.
Key Findings: Sector-Wide Expansion
The August NMI reading of 56.4 significantly exceeds the 50-point threshold that separates expansion from contraction, indicating strong growth across service sectors. This marks the 115th consecutive month of expansion for the non-manufacturing sector, demonstrating remarkable resilience despite economic uncertainties.
Industry Performance Highlights
Growth was widespread across 13 of 14 tracked non-manufacturing sectors, with only wholesale trade reporting contraction. The expanding sectors include:
- Real estate, rental and leasing services: Continued strong performance in property markets
- Accommodation and food services: Benefiting from sustained consumer spending
- Public administration: Showing stable government sector activity
- Healthcare and social assistance: Meeting growing demand from aging population
- Professional, scientific and technical services: Leading knowledge-based economic growth
Critical Indicators Show Strength
Supporting the positive NMI reading, several key sub-indices showed particularly strong performance:
- Business Activity/Production: Jumped 8.4 points to 61.5, marking 121 consecutive months of growth
- New Orders: Increased 6.2 points to 60.3, also continuing a 121-month growth streak
- Employment: Slightly declined to 53.1 but maintained 66 months of expansion
- Prices: Rose 1.7 points to 58.2, continuing a 27-month upward trend
Industry Challenges and Outlook
While the overall picture remains positive, some sectors face specific challenges:
The food services industry reported pressure from increased import costs due to tariffs, while agricultural sectors noted volatility in commodity prices. Supply chain pressures showed slight easing, with the supplier deliveries index at 50.5 (readings above 50 indicate slower deliveries).
Tony Nieves, Chair of the ISM Non-Manufacturing Business Survey Committee, characterized the August report as "encouraging" following two months of declines. He noted that while business activity and new orders might moderate in coming months, employment could see improvement.
The non-manufacturing sector continues to play an increasingly vital role in the U.S. economy, accounting for a growing portion of GDP and employment. The August rebound suggests underlying economic strength in consumer-facing industries despite broader macroeconomic uncertainties.