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Retailers and other service-oriented companies are finding ways to cope with the coronavirus and open for business.
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The large service side of the U.S. economy was thrown slightly off kilter in October by a record increase in coronavirus cases, but most companies expanded for the fifth month in a row and were “cautiously optimstic” about the fourth quarter.
An survey of executives at non-manufacturing companies slipped to 56.6% from 57.8% in September, the Institute for Supply Management said Wednesday. Reading above 50% signal that businesses are expanding.
The relatively strong reading in October suggests most service-oriented businesses encountered few disruptions from the record surge in coronavirus cases in the United States.
“Given COVID-19, the adjustments we have made across the company has allowed us to reach previous employment levels, and those furloughed are back to work, said an executive at a financial company.
Read: Manufacturers speed up in October as ISM survey hits 2-year high
What happened: Sixteen of the 18 service industries tracked by ISM expanded in October.
The only two that contracted in October were entertain and local and state government. Theaters, museums and other entertainment venues have had to restrict the number of customers and many chose to stay away for fear of catching the virus.
A gauge of production fell slightly, as did new orders, but both were still quite strong,
A measure of jobs and hiring, perhaps the most critical component of the survey, also declined. The employment index dipped to 50.1% from 51.8%, but it remained above the key 50% level for the second month in a row.
Although the index is high by historical levels, business is not back to normal. The survey asks executives whether conditions are getting better or worse, but it doesn’t reveal how much better.
Big picture: Service-oriented companies in fields such as tech, finance, retail healthcare employ the vast majority of Americans. After suffering a severe blow early in the coronavirus crisis, most of these industries have been on the mend.
The persistence of the coronavirus, however, is likely to constrain growth in the months ahead and weigh heavily on certain businesses such as hotels and entertainment that rely on large crowds.
Market reaction: The Dow Jones Industrial Average DJIA, +2.19% and S&P 500 SPX, +2.82% rose in early Wednesday trades as investors sifted through the results of the 2020 presidential election.
