U.S. service providers reported continued growth in activity last month, surveys of purchasing managers showed, as pandemic-related restrictions eased and the economic recovery progressed.
That improvement and similar rebounds in Asian countries contrasted sharply with Europe, where surveys indicated a fresh decline in service-sector activity as a surge in coronavirus infections in October pushed consumers to avoid face-to-face services such as in-person entertainment and eating out.
Private data firm
said Wednesday that its US Services PMI Business Activity Index registered 56.9 in October, the quickest pace of expansion since April 2015, and up from 54.6 in September. A reading above 50 indicates growth, while a level below 50 signals contraction.
Separately, the Institute for Supply Management’s nonmanufacturing index—a survey-based measure of activity in U.S. industries such as health care, restaurants, travel, and real estate—came in at 56.6 in October, down slightly from 57.8 in September, indicating a slowing in the pace of expansion.
U.S. trade data released Wednesday also indicated continued growth in September. Exports rose 2.6% to $176.35 billion, while imports rose 0.5% to $240.22 billion, their slowest pace of growth since trade bottomed out in May.
Consumer-goods imports, however, fell 3.6% in September, compared with the previous month—the first monthly drop since April—dragged down by a drop in purchases of household goods.
That fits with other signs U.S. household spending grew more slowly in September than the month before, as government financial support for households and businesses receded.
Figures released over recent weeks show that the global economy rebounded strongly in the three months through September from the huge declines in output recorded in the second quarter, while not making up all of the losses suffered during the most stringent period of lockdowns and other restrictions in most countries.
British Prime Minister Boris Johnson sets new lockdown restrictions in England starting Nov. 5, in an effort to contain the coronavirus’s resurgence. Photo: Alberto Pezzali/Zuma Press
Service-sector surveys in Asia indicated a rebound in demand. With the spread of the coronavirus largely contained, Chinese service providers reported the second-largest increase in activity for a decade, with the PMI rising to 56.8 in October from 54.8 in September.
But with new restrictions being put in place to combat rising infections in some parts of the world, the pace of the economic recovery is projected to slow during the final three months of the year.
Europe’s service firms reported a second consecutive month of contraction as coronavirus outbreaks there intensified in October. IHS Markit said its services Purchasing Managers Index for the eurozone fell to 46.9 in October from 48.0 in September, hinting that an even sharper fall looks likely in November after a number of European countries imposed tight restrictions on economic and social life.
“With lockdown measures being tightened, it is becoming increasingly hard to see how the eurozone economy will avoid falling back into decline,” said Chris Williamson, IHS Markit’s chief business economist. “For all countries the outlook has grown increasingly dark.”
The new restrictions in a number of countries aren’t as tight as those taken in April but are likely to suppress services activity even more in November. Surveys of purchasing managers indicated that even before those new restraints bite, service providers were facing a weakening of consumer demand, particularly in Spain, which relies heavily on tourism to power economic growth.
Figures released Tuesday by Spain’s statistics agency showed how severely its key tourism sector has been hit by the pandemic, with spending by foreign visitors in the first nine months of the year down 89.9% on the same period in 2019.
But where restrictions are easing, as in India, the services sector is rebounding, while manufacturers in many countries are also enjoying a strong pickup.
In India, where restrictions have been eased even as infections remain high, service providers reported an increase in activity for the first month since February, as the PMI rose to 54.1 from 49.8. However, service providers reported difficulties persuading their staff to turn up for work.
“Survey participants indicated that workers on leave had not returned and that a widespread fear of Covid-19 contamination continued to restrict staff supply,” said Pollyanna De Lima, an economist at IHS Markit.
The contrast between Europe and Asia underscores a divide between economies that rely more heavily on in-person activities and those oriented toward manufacturing the goods that consumers are snapping up.
In Europe, services represent almost three-quarters of activity. Many Asian countries are instead more geared toward exports of manufacturing goods, with services accounting for just over half of all activity in China.
A Global Asset Management Seoul Korea Magazine