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Oct. 3, 2018, 4:23 p.m. EDT

Another key barometer of U.S. economy hits postrecession high: ISM service index soars

ISM services index rises to 61.6 as employment hits record peak

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By Jeffry Bartash, MarketWatch


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Americans are confident and that’s making businesses confident, too.

The numbers: A survey of business executives pointed to the strongest U.S. growth in September in more than two decades, suggesting the economy is primed for a strong finish in 2018.

The Institute for Supply Management’s survey of non-manufacturing firms climbed to a 21-year high of 61.6 last month from 58.5. It’s the highest mark of the current nine-year-old expansion and the second strongest reading in the history of an index whose roots stretch back to 1997.

Numbers over 50 are viewed as positive for the economy, and anything over 55 is considered exceptional. The ISM services index includes an array of companies in areas such as finance, health care and retail that employ about 80% of all Americans.

The blowout number was quickly trumpheted by President Trump, who tweeted shortly after the report was released.

What happened: All 17 industries tracked by the ISM reported growth in September. Many companies saw an increase in new orders and they hired more workers. A gauge measuring employment rose to a record 62.4.

Executives acknowledged they are having trouble finding enough skilled workers in light of the nation’s low 3.9% unemployment rate. They also said U.S. tariffs on Chinese goods and other foreign products were still a worry. But by and large they were gung-ho about the next few months.

Big picture: The economy is going strong and appeared primed for a strong holiday season to finish out the year. The latest ISM survey shows little likelihood that growth will slow anytime soon, and the recent trade agreement with Canada is sure to further ease the worries of corporate America.

Read: California’s ‘golden’ economy could be tarnished by Trump tariffs, high cost of living

What they are saying?: “Overall positive outlook in the economy continues, but we are cautious due to limitations in available manpower,” said an executive at a high-tech company.

“A robust report, consistent with further strength in the overall economy,” said chief economist Scott Brown of Raymond James, who added that the strong pace of U.S. growth all but assures the Federal Reserve will raise interest rates again by December.

Market reaction: The Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA -0.95% and S&P 500 /zigman2/quotes/210599714/realtime SPX -0.39% rose in Wednesday trades, with the Dow setting a fresh record close.

The 10-year Treasury yield /zigman2/quotes/211347051/realtime BX:TMUBMUSD10Y 0.00% surged to 3.16%, reflecting the strong economy and higher odds of another Fed rate hike soon.

/zigman2/quotes/210598065/realtime
US : Dow Jones Global
26,770.20
-255.68 -0.95%
Volume: 293.61M
Oct. 18, 2019 5:08p
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/zigman2/quotes/210599714/realtime
US : S&P US
2,986.20
-11.75 -0.39%
Volume: 1.99B
Oct. 18, 2019 5:08p
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/zigman2/quotes/211347051/realtime
add Add to watchlist BX:TMUBMUSD10Y
BX : Tullet Prebon
1.75
0.00 0.00%
Volume: 0.00
Oct. 18, 2019 4:59p
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Jeffry Bartash is a reporter for MarketWatch in Washington.

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