WASHINGTON: The vital and booming US services sector saw record growth in October, and the data point to continued strength in the months ahead, according to a monthly survey released Friday.
The sector has been growing for 94 consecutive months, and this is the second straight record in the Institute for Supply Management's non-manufacturing index.
The index defied expectations for a dip from the strong showing in September, rising to 60.1 percent from 59.8 percent. Any reading above 50 percent indicates growth.
That is the highest ever recorded since the index debuted in January 2008, but Anthony Nieves, chair of ISM's Non-Manufacturing Business Survey Committee, said looking further back it was the highest since August 2005.
The jump came on expansion in 16 of the 18 industries surveyed, with only educational services and entertainment and recreation slowing.
The increase was driven by a rise in production of almost a full point to 62.2 percent, as well as in employment and new export orders, the survey showed. That offset slower growth in new orders and prices.
Nieves told reporters he was "pleasantly surprised" growth continued to accelerate after the strong showing in September, and acknowledged that at some point there will be questions about how long the faster pace can hold.
"But all indications are we'll see this continued strength in this sector going forward. At what rate of growth it remains to be seen," he said.
He noted that the labor market continues to be an "impediment to growth," as companies report difficulty finding skilled workers to fill open positions.
The back-to-back hits from Hurricanes Harvey and Irma over the summer are certainly having some effects on the industry, he said, though it is captured more in comments from respondents than in the index's calculations.
Some firms are noting labor being diverted to Houston and Florida, while others point to shortages of building materials, and the need to replace vehicles lost in the storms.
Added to the continued growth in the manufacturing sector index, economists say the figures bode well for economic growth in the fourth quarter.
This "provides another indicator that suggests the economy has started the fourth quarter on a strong note," John Ryding of RDQ Economics said in an analysis of the data.
He said "the last two months have shown manufacturing plus nonmanufacturing activity index at the highest two-month average on record."