Service Sector Resilient Despite Steady Inflation
Despite talks of a potential recession and inflation's tight hold on the U.S. economy, the services sector remains resilient. Jeffrey Roach, chief economist for LPL Financial, said business activity is at its highest since December 2021, which is an "important breakpoint, as the consumer showed stable demand for services after the headwinds of war, inflation and geopolitical uncertainty," according to AP News.
Hotels, restaurants and other service-related businesses managed to expand throughout the summer, according to the latest survey from the Institute for Supply Management. "I think you've still got some pent-up revenge travel, if you will, of people trying to make up. You've still got excess savings that have not been worked off. And you've also got a really strong labor market," Kathleen Oberg, chief financial officer of Marriott International, said at a recent business conference, per the news outlet.
But economists are still on alert for what is to come. Broader services account for nearly 70% of the economy—and though there is stability among those sectors, supply chain delays continue to affect gross domestic product. Loretta Mester, president of the Federal Reserve Bank of Cleveland, said it is hard to know if inflation has even peaked yet. "It will take a couple years before inflation returns to the Fed's 2% goal," Mester said.