By Scott Kanowsky
Investing.com -- U.S. services activity slid to its slowest growth rate in more than two years in October, according to a survey from the Institute for Supply Management on Thursday, as businesses faced increasing headwinds from soaring inflation.
ISM's monthly non-manufacturing PMI for the month dropped to a reading of 54.4, down from 56.7 in September and below economists' forecasts of 55.5. It is the lowest mark since May 2020.
A level above 50 generally indicates expansion in the services industry, which makes up more than two-thirds of all U.S. economic activity.
The data comes as the U.S. Federal Reserve moves to aggressively hike interest rates to quell inflation. On Wednesday, the central bank raised borrowing costs by 75 basis points for the fourth straight time but flagged that future increases may be smaller to allow for the "cumulative" impact of monetary policy tightening.
ISM's prices index, which measures how much services sector firms pay for inputs, rose after five straight months of decreases. That uptick, coupled with a decline in raw material prices in ISM's manufacturing index earlier this week, signaled that inflation may be transferring into services from goods.
New ordersreceived by businesses slumped to 56.5.
The survey's metric for supplier deliveries, where numbers above 50 indicate slowing, jumped to 56.2 from 53.9. Order backlogs were mostly unchanged.
Meanwhile, ISM's measure of employment dipped into contraction territory for the fifth time in 2022 after it expanded in the prior month.
"There are still challenges in hiring qualified workers, and due to uncertainty regarding economic conditions, some companies are holding off on backfilling open positions," said Anthony Nieves, chair of the ISM Services Business Survey Committee.