U.S. services sector activity raced to a 21-year high in September and companies boosted hiring, signs of enduring strength in the economy at the end of the third quarter.

The upbeat reports likely keep the Federal Reserve on track to raise interest rates again in December. The U.S. central bank increased rates last week for the third time this year. Fed Chairman Jerome Powell said on Tuesday the economy's outlook was "remarkably positive."

The Institute for Supply Management said its non-manufacturing activity index jumped 3.1 points to 61.6 last month, the highest reading since August 1997.

The ISM's new orders sub-index for the services sector increased 1.2 points to a reading of 61.6 last month. The survey's factory employment measure jumped to 62.4 in September from 56.7 in August. This suggests September's nonfarm payrolls could surprise on the upside when the government publishes its closely watched employment report on Friday.

Companies in the ISM survey were upbeat about business conditions last month, but reported lingering concerns "about capacity, logistics and the uncertainty with global trade." According to the ISM, while retailers were bullish about business they said there was "a lot of uncertainty" about the import duties and that this "may cause a shift in production sites." Wholesalers said the import tariffs were "inflating prices, which are difficult to pass along to the end user due to competitive pressures."

There were also complaints about labor shortages, especially truck drivers. The ISM's supplier deliveries index for the services sector increased last month, pointing to bottlenecks in the supply chain.

Companies reported that "suppliers are getting backlogged" and that there were also "capacity and material shortages." They also reported paying higher prices for materials and services.

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