MNI INTERVIEW: US Services May Slow on Stimulus, Weather- ISM

The U.S. service expansion should continue but needs Congress to deliver more aid to prevent bankruptcies among firms relying on outdoor spaces during the summer, Institute for Supply Management services chair Anthony Nieves told MNI.

Forthcoming economic data shouldn't be taken at face value, and the economy still has a long way to go before it fully recovers from the Covid-19-led recession, he said. Nieves doesn't foresee a second service-sector dip and growth should continue through the next few years.

"We're seeing growth, but we're nowhere near pre-pandemic levels," he said in an interview, even if it looks like "everything is rosy."

The ISM Services PMI rose 0.9 points to 57.8 in September, above the Bloomberg median for a reading of 56.2 and signaling growth for the fourth consecutive month. The business activity sub-index grew by 0.6 points to 63 and the employment index rose to 51.8 from 47.9 in August, entering expansionary territory for the first time since the onset of the Covid-19 pandemic.

Growth could be hampered by disagreements over another federal fiscal aid package, and by the fall and winter months that will likely drive consumers away from restaurants and retailers. "People are just treading water right now," Nieves said.

MONTH TO MONTH

Another stimulus package will likely pass "if not before the election, then soon thereafter," he said, because both Democrats and Republicans in Congress would be hard pressed to let more businesses go under. "There is agreement as far as it relates to individuals and small businesses," he said.

Roughly 21% of small businesses surveyed by the National Federation of Independent Business in August said they will have to close permanently if economic conditions don't improve in the next six months. More than 80% who had received a Paycheck Protection Program loan under the CARES Act had exhausted those funds.

"Stimulus is necessary," Nieves said. "The fatality rate for businesses will be very high post-pandemic because for many of these small businesses, their cash flow is literally month-to-month."