- US service-sector activity slowed to its weakest pace in three years in September, according to an ISM survey out Thursday.
- The data marked the latest sign that the effects of the Trump administration’s trade disputes have started to ripple through the broader economy.
- Several companies in the survey said tariffs that President Donald Trump levied on China and other major trading partners last year have posed challenges for them.
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US service-sector activity slowed to its weakest pace in three years in September, the latest sign that the effects of the Trump administration’s trade disputes have started to ripple through the broader economy.
Non-manufacturing index fell to 52.6 last month, according to an Institute for Supply Management report released on Thursday, as employment and new orders declined more than expected. That was the lowest reading since August 2016 and far below expectations for 55.3.
Several of the purchasing managers who were surveyed in the monthly report said tariffs that President Donald Trump levied on China and other major trading partners last year have posed challenges for them.
“While Chinese tariffs are understandable, they are impacting our supply chain decisions. We are actively pursuing alternate sources for our China-based production,” one respondent said. “At this point, we have not passed on tariff costs to our customers, but we are evaluating all options.”
That could have a particularly significant impact on growth in the US, where the services sector accounts for more than two-thirds of economic activity.
Read more: Trump promised to revive US manufacturing. But the sector just plunged deeper into a recession.
In September, the World Trade Organization said that global trade in commercial services fell to 98.4 in June, nearly five points from a year earlier and below its long-term average of 100. The WTO gauge includes service sectors such as air travel and finance.
“We can see that service jobs are put at risk when President Trump launches a trade war,” said Mary Lovely, a trade scholar at the Peterson Institute for International Economics. “Many service jobs depend on trade, not just because we export services directly but also because services go into export production.”
The International Air Transport Association said last month passenger and cargo demand contracted for a ninth consecutive month and urged the US and China to reach a deal to defuse trade tensions.
“Trade tensions are weighing heavily on the entire air cargo industry,” said Alexandre de Juniac, the director-general of IATA. “Higher tariffs are disrupting not only transpacific supply chains but also worldwide trade lanes.”
Now read: The chief strategist at a $1 trillion investing giant says Trump is doomed to lose his trade war — and explains why that would be the best possible outcome for markets
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