• ARI Media

U.S. Service-Sector Activity Surge

U.S. service industries boosted production and hiring in November, the latest sign the economy is expanding at a solid pace after a weak first half of the year.

The Institute for Supply Management said Monday its index of nonmanufacturing activity rose to 57.2 in November from 54.8 in October. A reading above 50 indicates sector expansion.

Last month’s reading-the highest in 13 months-easily exceeded economists’ expectation of a level of 55.5.

The service sector-a broad range of industries such as restaurants, accounting, barbers and real estate-represents most of the economy in the U.S. The sector struggled earlier in the year but has rebounded in recent months as consumers, benefiting from higher earnings and moderate inflation, spend steadily. Business spending also appears to be picking up, though it remains weak overall.

The data suggest “the economy’s largest sector is gaining momentum as we head into the final months of the year,” Lindsey Piegza, chief economist at Stifel Nicolaus & Co., said in a note to clients.

A measure of production by service industries rose 4 points to a reading of 61.7 last month, the ISM report showed. An index of new orders slipped but remained at a solid 57. An employment index surged more than 5 points to 58.2, indicating that companies are hiring rapidly.

Ian Shepherdson, chief economist at Pantheon Macroeconomics, said the report, along with others on the labor market, suggests U.S. job growth will accelerate rapidly in early 2017.

“Whether employers can find that many people each month is another question,” Mr. Shepherdson said in a note to clients. “If they can’t, the upward pressure on wages will intensify.”

The U.S. added 178,000 jobs in November-indicating a strong expansion-and the unemployment rate fell to a nine-year low of 4.6%, the Labor Department said last week.

Monday’s report and a report last week showing a steady expansion of the manufacturing sector suggest the economy is growing at a 3% annual pace in the final months of the year, approaching the third quarter’s 3.2% growth. During the first half of the year, the economy grew at just above a 1% pace.

via HSN

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