US service sector booms in Nov despite shortages

Business activity in the massive US services sector grew beyond expectations in November even as companies dealt with shortages and supply delays, according to an industry survey released Friday.

The Institute for Supply Management (ISM) said its services index climbed to an all-time high of 69.1 per cent last month, more than expected and a gain of 2.4 points from October.

All industries surveyed reported growth, while employment climbed, orders were stable but strong and prices fell back slightly even as they remained at high levels, according to the report.

However, the survey's chair Anthony Nieves said the supply shortages and delays that have complicated business across the world's largest economy have yet to abate.

"Demand continues to outpace supply that has been impacted by capacity constraints, shortages of labor and materials and logistical challenges," he said.

There was no improvement in supplier delivery times last month, the report said.

Order backlogs did decline more than one percentage point to 65.9 per cent but that remained above the 50-per cent threshold indicating growth.

 "Construction material shortages and longer lead times continue to hamper operations. Significant cost increases from labor and freight are forecast for the start of next year," one construction firm told the survey.

Oren Klachkin of Oxford Economics said the data showed the services sector was  "on a firm footing" but warned that the recent Omicron variant of Covid-19 and the ongoing supply issues could undercut industries' progress.

"Substantial supply-side restraints will continue to cap the expansion, even if Omicron doesn't prove to be a significant threat. Companies face a long road ahead before supply-chain stressors are fully resolved," he wrote in an analysis.