WASHINGTON - U.S. services sector activity accelerated in August and private employers boosted hiring, suggesting the economy continued to grow at a moderate pace despite trade tensions which have stoked financial market fears of a recession.
But given the erosion of business confidence as a result of the trade impasse and the threat it poses to the longest economic expansion in history, the Federal Reserve is still expected to cut interest rates again this month. The Institute for Supply Management said its non-manufacturing activity index increased to a reading of 56.4 in August from 53.7 in July. A reading above 50 indicates expansion in the sector, which accounts for more than two-thirds of U.S. economic activity.
August’s surge in services industry activity reflected increases in measures of production and new orders. Export orders, however, fell as did imports. The ISM said 16 service industries, including retail trade, utilities and public administration, reported growth last month. Wholesale trade was the only industry reporting a decrease in growth.
The ADP report, which is jointly developed with Moody’s Analytics, came ahead of the release of the government’s more comprehensive employment report on Friday.