Service Industries Expand at Faster Pace Than Forecast
America’s service providers expanded more than forecast last month, spurred by an upturn in orders that coincided with stepped-up demand at the nation’s factories.
The Institute for Supply Management said Dec. 5 that its nonmanufacturing index held at 57.2 in December, the highest level since October 2015. The median forecast in a Bloomberg News survey called for 56.8. Readings above 50 signal growth in the industries that make up nearly 90% of the economy.
Bookings at service producers were the strongest since August 2015, helping explain a pickup in business sentiment about the economy since the presidential election in November. The ISM’s measure of service-related business activity, which parallels manufacturing output, was near the highest in more than a year.
Earlier this week, the Tempe, Arizona-based supply management group said that its index of manufacturing reached a two-year high last month, powered by the biggest monthly increase in orders growth since August 2009.
Together, the reports indicate the economy will gain momentum in 2017 after a projected soft fourth quarter as American industry prepares for a change in government leadership. President-elect Donald Trump has said he aims to boost economic growth and increase hiring by taxing less and reducing regulations.
The ISM services survey covers a range of industries, including retail, health care, agriculture and construction. Estimates in the Bloomberg survey ranged from 55 to 58. The December figure exceeds the 54.8 average from January through November 2016. It matches the average for all of 2015.
The ISM’s measure of orders at services providers increased to 61.6 in December from 57 a month earlier. The group’s business activity index was little changed at 61.4 after 61.7.
A measure of services employment cooled to 53.8 in December from a 13-month high of 58.2.
The Labor Department is set to release December employment figures on Friday, Jan. 5. Payrolls are projected to increase by about 180,000 after a 178,000 advance in November.
Like the ISM’s latest manufacturing survey, service producers experienced faster inflation in December. The group’s measure of prices paid for materials climbed to 57, the highest reading since August 2014, from 56.3 in November.
