Hotels, restaurants, retailers and other businesses that employ most Americans grew more slowly in August, but ongoing labor and supply shortages appeared to be a bigger culprit than the delta strain of the coronavirus.
An index of service-oriented business activity fell to 61.7% last month from a record 64.1% in July, the Institute for Supply Management said Friday. That was in line with the forecast of economists surveyed by The Wall Street Journal.
Any reading above 50% signals expansion, and numbers above 60% are exceptional.
A surge in delta cases of the coronavirus late in the summer appeared to stunt the U.S. economic recovery, but the ISM survey suggests the virus was not as big a factor as a weak August employment report implied.
“Demand for labor is clearly quite high, but the supply remains limited with people delaying their return to work,” said money-market economist Thomas Simons of Jeffferies LLC.
Most executives who were polled blamed persistent shortages of supplies and labor that are preventing them from producing enough services to meet high customer demand. These shortages have also sharply raised costs and contributed to the biggest increase in inflation in the U.S. in 30 years.
Few executives cited Covid directly as one of their biggest constraints.
“Material and labor shortages continue to hinder productivity. Price increases are ever-present and repetitive,” said an executive at a construction company.
“Supply chain disruptions—including manufacturing-labor shortages, logistics delays and lack of material to make products —are significantly disrupting our business,” an executive at food-services provider told ISM.