US services growing at fast pace

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Tempe - Service industries expanded in April at the fastest pace in eight months, a sign the biggest part of the U.S. economy will bolster growth this quarter.

The Institute for Supply Management’s non-manufacturing index rose to 55.2, higher than projected, from the prior month’s 53.1, the Tempe, Arizona-based group’s report showed today. Readings above 50 indicate expansion. The median forecast of economists surveyed by Bloomberg called for 54 in the gauge for services, which account for almost 90 percent of the economy.

The gain, combined with the strongest pace of manufacturing in four months, indicates growth is rebounding after a weak first quarter. Employers boosted payrolls in April by the most in two years and the jobless rate dropped to the lowest level since 2008, laying the ground for a pickup in consumer spending that will benefit companies such as United Parcel Service Inc.

“Things are getting better,” Robert Stein, deputy chief economist at First Trust Portfolios LP in Wheaton, Illinois, said before the report. “Among the top line numbers, we’re seeing a re-acceleration of the economy. Consumers are in excellent shape” and “spending is going to continue to grow this quarter.”

Estimates from 69 economists in the Bloomberg survey ranged from 52 to 55.6. The index has averaged 53.7 since the recession ended in June 2009.

Stocks held losses after the figures as financial shares declined, a measure of Chinese manufacturing missed estimates and violence spread in Ukraine. The Standard & Poor’s 500 Index dropped 0.2 percent to 1,876.76 at 10:18 a.m. in New York.

The ISM non-manufacturing survey covers an array of industries including utilities, retailing, and health care and also factors in construction and agriculture.

INDUSTRIES EXPANDING

Fourteen service industries reported growth in April, while four said business contracted, today’s report showed.

The group’s gauge of business activity climbed to 60.9 in April from 53.4, the biggest increase since February 2008. Orders jumped to an eight-month high of 58.2 from 53.4. The 4.8- point gain from a month earlier was the most since March 2010.

The employment gauge decreased to 51.3 from 53.6, while the index of orders waiting to be filled dropped to 49 from 51.5.

The index of prices paid increased to 60.8 from 58.3.

MANUFACTURING STRENGTHENS

An ISM report last week showed U.S. manufacturing accelerated in April. The group’s factory index climbed to 54.9, the strongest so far this year.

The manufacturing sector accounts for about 12 percent of the economy. Sales are increasing at automakers such as General Motors Co., while a pickup in demand as the weather warms will help other companies such as Whirlpool Corp.

Demand is getting a boost as more Americans find work. Labor Department figures last week showed America’s job-creation machine kicked into higher gear in April. The 288,000 gain in payrolls exceeded the median forecast in a Bloomberg survey and followed a 203,000 advance in March. The unemployment rate fell to 6.3 percent, the lowest level since September 2008.

UPS, the world’s largest package-delivery company, is among businesses that anticipate more demand after a winter-depressed quarter. Atlanta-based UPS is viewed as an economic bellwether because it delivers a variety of goods, from financial documents to electronics and appliances, around the globe.

“We expect the pace of US economic growth to pick up as 2014 progresses,” Scott Davis, chief executive officer, said on an earnings call on April 24. “the macroeconomic environment looks decent as we move forward” in US and global markets.

MasterCard Inc., the second-biggest payments network, on May 1 reported first-quarter profit that beat analysts’ estimates as customers increased spending using their credit and debit cards. Net income also topped analysts’ projections at American Express Co., the biggest US credit-card issuer by purchases, which issues results last month.

Bloomberg


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