MNI INTERVIEW: US Services Growth Likely to Plateau on Trade

By Brooke Migdon

     WASHINGTON (MNI) - Global trade tensions should cap meaningful

service-sector expansion into the near future, Institute for Supply Management

non-manufacturing survey chairman Anthony Nieves told MNI Wednesday.

     Nieves said he expects service-sector growth to continue into the new year,

though it may not be as "robust" as earlier in 2019, due mainly to ongoing U.S.

tensions with global trading partners including China and the EU.

     The ISM non-manufacturing index, a measure of the service sector, slowed

slightly to 53.9 in November after reaching a two-month high of 54.7 in October.

     The new orders and employment sub-indices also grew in November, and while

business activity fell 5.4 percentage points to 51.6, it still remained above

the threshold for contraction.

     --NEW TRADE WARS

     The effects of tariffs on imported goods from China have already been felt

by some service industries and the upcoming Dec. 15 tranche, which targets

mostly consumer goods, is likely to further weaken the service economy. At the

same time, fresh threats of additional tariffs on $2.4 billion worth of French

goods over the country's alleged discriminatory digital tax has some supply

managers worried.

     "If we get a resolution to tariffs and the trade war, that would provide a

good uptick for both sectors," he said, referencing the interdependence of the

manufacturing and service economy in import and export industries.

     Although service jobs are less exposed to trade than their manufacturing

counterparts, specific sectors have already suffered from continued holdups in

trade talks between the U.S. and China, which have yet to yield a preliminary

"phase one" trade deal nearly two months after it was promised. 

     U.S. exporters of pork and soybean products reported declining business

activity and sluggish demand as China turns to countries like Argentina and

Brazil for agricultural imports.

     Global trade tension remains the most significant roadblock to meaningful

growth, according to Nieves.

     "Once we get past this, all things are set," he said, noting low inflation

and strong employment numbers. "There's nothing there that's going to derail the

expansion, these things don't end on their own."

--MNI Washington Bureau; +1 202 371 2121; email: brooke.migdon@marketnews.com

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