US ISM Service Sector: Activity hasn't meaningfully stalled despite Delta – Wells Fargo

Data released on Tuesday from the US service sector came in above expectations. According to analysts at Wells Fargo the numbers suggest that activity hasn't meaningfully stalled in the sector despite the rise of the Delta variant. A decline in the supplier deliveries index and improvement in inventory sentiment suggests supply issues may be improving, they added.

Key Quotes: 

“The ISM services index rose to 61.9 in September. While this signals only an incremental improvement in activity from August, it should quell some concern over consumers meaningfully pulling back from in-person services in the face of the Delta variant. Activity held up during the month, and there was even a slight indication of some easing in supply.”

“Supply constraints still remain prevalent across the industry, and in a sense the report showed some conflicting movements. The inventory sub-component slipped to its lowest level in over a year while order backlogs picked up again.”

“The decline in the supplier deliveries index to 68.8 suggests there may have been some improvement in what are still likely well-above normal delivery times. More encouraging is the fact that inventory sentiment also seemed to improve considerably.”

“We suspect it will be awhile yet until supply problems more meaningfully ease and provide relief to service providers and manufacturers alike, but the continued expansion exhibited by the September ISM bodes well for growth in the third quarter.”