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U.S. Service Sector Growth Re-Accelerates More Than Expected In August

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After reporting an unexpected contraction in U.S. manufacturing activity earlier this week, the Institute for Supply Management released a separate report on Thursday showing a notable acceleration in the pace of growth in U.S. service sector activity in the month of August.

The ISM said its non-manufacturing index climbed to 56.4 in August after falling to 53.7 in July, with a reading above 50 indicating growth in service sector activity. Economists had expected the index to inch up to 54.0.

The bigger than expected increase by the non-manufacturing index came after it dropped to its lowest level since August of 2016 in the previous month.

"The non-manufacturing sector's rate of growth rebounded after two consecutive months of cooling off," said Anthony Nieves, Chair of the ISM Non-Manufacturing Business Survey Committee.

He added, "The respondents remain concerned about tariffs and geopolitical uncertainty; however, they are mostly positive about business conditions."

The bigger than expected increase by the headline index came as the business activity index surged up to 61.5 in August from 53.1 in July and the new orders index jumped to 60.3 from 54.1.

The report said the prices index also rose to 58.2 in August from 56.5 in July, pointing to a modestly faster rate of price growth.

On the other hand, the employment index slid to 53.1 in August from 56.2 in July, indicating a slowdown in the pace of job growth in the service sector.

The ISM released a separate report on Tuesday showing manufacturing activity contracted for the first time in three years in the month of August.

The purchasing managers index fell to 49.1 in August after dipping to 51.2 in July, with a reading below 50 indicating a contraction in manufacturing activity. Economists had expected the index to edge down to 51.0.

With the bigger than expected decrease, the PMI dropped below 50 for the first time since August of 2016 and hit its lowest level since January of 2016.

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