U.S. service sector activity rises above pre-pandemic level in September - ISM survey - Reuters News

WASHINGTON, Oct 5 (Reuters) - U.S. services industry activity picked up in September, pulling above a level that prevailed before the COVID-19 pandemic struck the nation, amid increases in new orders and employment.

The Institute for Supply Management (ISM) said on Monday its non-manufacturing activity index rose to a reading of 57.8 last month from 56.9 in August. That put the index just above its 57.3 level in February.

A reading above 50 indicates growth in the services sector, which accounts for more than two-thirds of U.S. economic activity. Economists polled by Reuters had forecast the index slipping to 56.0 in September.

The improvement in services industry activity fits in with expectations for a record rebound in economic growth in the third quarter after a historic plunge in gross domestic product in the April-June period. The economy got a boost over the summer from fiscal stimulus.

Growth has, however, shifted into low gear as businesses exhaust government loans to help them with expenses like wages and funding for a weekly unemployment subsidy for millions runs out. New coronavirus cases are rising, with a surge expected in the fall, which could lead to some restrictions being imposed on businesses in the services sector.

The ISM reported last week that factory activity slowed in September as new orders retreated from a more than 16-1/2-year high. The government reported on Friday the economy added 661,000 jobs in September, the fewest since the jobs recovery started in May, after creating 1.489 million in August.

The ISM survey's measure of new orders for the services industry increased to a reading of 61.5 in September after dropping to 56.8 in August. But backlog orders and exports orders fell last month. The survey's index of services industry employment rebounded to 51.8 from a reading of 47.9 in August.

Euro zone retail sales stronger than expected in Aug - Reuters News

BRUSSELS, Oct 5 (Reuters) - Euro zone retail sales were much stronger than expected in August due to a sharp surge of online purchases and increased clothing sales amid the COVID-19 pandemic, although July sales were revised downwards, data showed on Monday.

Retail sales in the 19 countries sharing the euro jumped 4.4% month-on-month in August for a 3.7% year-on-year gain, beating economists' expectations of a 2.4% monthly and a 2.2% annual increase.

But figures for July were revised down to declines of 1.8% month-on-month and 0.1% year-on-year from the previously reported 1.3% drop and 0.4% rise respectively.

The revised numbers showed the pick-up in consumer spending was slower than previously thought in the month when most EU countries had lifted many pandemic-related restrictions.

The August sales jump was mainly a result of a 12.4% monthly and a 23.8% annual surge in mail and internet orders. This reversed a sharp month-on-month drop and was roughly double the year-on-year increase in July.

There was also a 7.7% jump in sales of clothes and shoes against July, although they remained 14.1% below last year's levels and a 2.4% monthly increase in sales of food, drinks and tobacco, which was also higher than a year earlier by 3.2%.

Euro zone economic recovery floundered in Sept as services struggled-PMI - Reuters News

LONDON, Oct 5 (Reuters) - The euro zone's economic recovery faltered in September as the reimposition of some restrictions on activity to halt a resurgence in the coronavirus sent the bloc's dominant service sector into reverse, a survey showed.

Rising infection rates in the region, something a Reuters poll said last month was the biggest threat to the recovery, will concern policymakers who had hoped the bloc's economy was healing after contracting an historic 11.8% in the second quarter. ECILT/EU (Full Story)

To support the economy, the European Central Bank plans to make 1.35 trillion euros of pandemic-related additional asset purchases and the European Union has announced a 750 billion euro recovery fund due to kick in next year.

But that didn't stop IHS Markit's final composite Purchasing Managers' Index, seen as a good barometer of economic health, falling to 50.4 in September from August's 51.9, close to the 50 mark separating growth from contraction.

It was dragged down by the PMI for services industries, which accounts for around two thirds of GDP, which slumped to 48.0 from August's 50.5, albeit slightly better than a preliminary 47.6 estimate.

"With the euro zone economy having almost stalled in September, the chances of a renewed downturn in the fourth quarter have clearly risen," said Chris Williamson, chief business economist at IHS Markit.

"Much will depend on whether second waves of virus infections can be controlled, and whether social distancing restrictions can therefore be loosened to allow service sector activity to pick up again."

Suggesting any pick up may take some time, demand for services fell in September and firms cut headcount for a seventh month. The new business index fell to 48.1 from 49.8.

Still, optimism about the coming year improved to levels not seen since before Europe felt the full brunt of the pandemic. The composite future output index rose to 60.5 from 57.8, its highest since February.

UK growth slowed less than thought in September - PMI data - Reuters News

By David Milliken

LONDON, Oct 5 (Reuters) - Britain's economy proved more resilient than initially thought last month, despite a tightening of lockdown restrictions and an end to a temporary government subsidy for businesses such as restaurants and bars, a major survey showed on Monday.

The IHS Markit/CIPS Purchasing Managers' Index (PMI) for the services sector - which does not cover retailers - dropped to 56.1 in September from August's five-year high of 58.8, but the decline was smaller than an initial "flash" estimate of 55.1.

Readings above 50 indicate that a majority of businesses reported growth in activity.

The composite PMI, which includes manufacturing data released last week, fell to 56.5 from August's six-year high of 59.1, again a smaller drop than first reported.

"The UK service sector showed encouraging resilience in September, with business activity continuing to grow solidly despite the government's 'Eat Out to Help Out' scheme being withdrawn," IHS Markit economist Chris Williamson said.

"Many other consumer services activities showed a similar slide back into contraction as renewed lockdown measures were introduced," he added.

The PMI data painted a more upbeat picture than most other business surveys.

The British Chambers of Commerce said on Thursday that many more firms reported falls in sales during the third quarter than saw an increase, and said its data did not point to a sharp, 'V'-shaped recovery. (Full Story)

Britain's economy shrank by a record 20% in the second quarter when lockdown measures were tightest, and performed worse than any other major advanced economy in the first half of the year. (Full Story)

However there has been a fairly rapid - though uneven - recovery and economists polled by Reuters forecast on average that August gross domestic product data, due on Friday, will show output was around 7% below its year-ago level.

Last week the Bank of England's chief economist, Andy Haldane, said he expected output in September to be just 3-4% below year-ago levels, and said many commentators had underestimated the strength of the rebound. (Full Story)

Nonetheless, a sharp rise in COVID cases in Britain in September - following similar surges in France and Spain - has led to new restrictions on socialising at home or outside, though schools and workplaces remain open.

IHS Markit said confidence about the future remained positive, but was its weakest since May in both the services and the composite data.

Businesses also cut jobs for a seventh month in a row in September - the longest run since 2010. The reductions, though, were at the slowest pace since March despite the imminent end of a government job support programme this month.