The US service sector grew more than anticipated in October as crucial gauges of new orders and employment rose suggesting that the yearlong descent may have stabilized, perhaps awaiting details of the proposed US China trade accord.

Purchasing managers’ indexes from the Institute for Supply Management (ISM) increased in four important categories last month mirroring the gains in the manufacturing survey released this past Friday. 

The headline index climbed to 54.7 in October from its three-year low of 52.6 in September. It has been forecast to reach 53.5. Business activity rose to 57.0 from 55.2, also outstripping the 55.0 median prediction. Employment jumped from a five-and a half year low of 50.4 in September to 53.7 and new orders mounted to 55.6 from their 37-month bottom of 53.7.  

Services PMI


One caveat to the upturn was the new export orders index which fell to 50.0 in October, a more than two-year low, from 52.0 in September.  This is in sharp contrast to the same index for manufacturing which soared 9.4 points to 50.4 in October.

US economic growth has paralleled the decline in the ISM indexes this year. Annualized GDP has slipped from 3.1% in the first quarter to 2.0% in the second and 1.9% in the third. Both the manufacturing and services indexes peaked at 60.8 in the third quarter of last year, manufacturing in August and Services in September.

Business investment has been the weak link in the US economy for the last year responsible for most of the drop in GDP.  The durable goods category of non-defense capital goods ex-aircraft, an oft used proxy for business investment spending, was negative in both the six-month and 12-month moving averages at -0.167% and -0.092% respectively in September.


Despite the drop in economic growth the labor economy has remained healthy.

The October payrolls report showed 128,000 new positions in spite of the General Motors strike which cut between 46,000 and 80,000 from the job rolls.  Revisions to August and September added 95,000 bringing the three-month moving average to 176,000.  The GM jobs should return in November.

Between 125,000 and 150,000 monthly jobs are needed each month to provide employment for new entrants to the labor force. 

Average annual earnings have risen at a 3% or better pace for 15 months and unemployment has been at or close to five decade lows for 18 months.

These three reports have helped to mitigate concerns that the decline in manufacturing was a harbinger for the much larger service sector.  

They have also reinforced the judgement of the Federal Reserve in moving rate policy to neutral after last Wednesday’s third 25 basis point cut this year. Chairman Powell’s characterization of the US economy being in a “good place” now seems self-evident.

The yield curve in the 2 and 10-year Treasuries which had inverted briefly in late August exciting recession talk, has since reversed and widened to a normal 23 points, (2:00 pm EST).





Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.

Analysis feed

FXStreet Trading Signals now available!

Access to real-time signals, community and guidance now!

Latest Analysis

Latest Forex Analysis

Editors’ Picks

EUR/USD accelerates decline and nears 1.1200

The US Nonfarm Payroll report’s effects are long gone. The greenback gets attention as stocks eased sharply from intraday highs, still holding in the green, yet undermined by record coronavirus cases in the US.


AUD/USD hovering around 0.6920 after a dull day

AUD/USD pair seesawed between gains and losses, settling for a second consecutive day at around 0.6920. Australian PMIs and Chinese services output coming up next.


XAU/USD strengthens and rebounds from weekly lows toward $1780

Gold is trading at daily highs, near $1780 after rising $20 from the daily low. The metal dropped to $1757 after the release of the US employment report and then bounce sharply to the upside.

Gold News

Crypto collapse with Bitcoin falling below $9,000 and Ethereum getting close to $220

Most cryptocurrencies are experiencing a significant sell-off after Bitcoin fell below $9,000. BNB/USD has suffered the most with a 4% drop towards $15 and needs to hold $14.8 support. 

Read more

Oil: $40 per barrel has been broken again but there is a lack of conviction at these current levels

WTI has continued to move higher on Thursday but the price action seems pretty lacklustre despite volatility elsewhere. There have been some decent news stories in the past few sessions as it was confirmed OPEC output reached a two-decade low after over compliance from Saudi Arabia. 

Oil News

Forex Majors