WASHINGTON – Service industries expanded in May at the fastest pace in nine months as orders picked up, indicating improving sales will help the U.S. economy strengthen.
The Institute for Supply Management’s non-manufacturing index climbed to 56.3 last month from 55.2 in April, the Tempe, Ariz.-based group said Wednesday. Readings greater than 50 signal expansion. The median forecast of economists in a Bloomberg survey called for 55.5. The gauge of orders reached a more than three-year high.
The third straight gain in the services measure shows demand is strengthening as companies add workers and rising stock and home prices give consumers the wherewithal to keep spending. The advance, along with the fastest pace of manufacturing this year, points to a second-quarter rebound in the economy.
“It suggests the strong momentum we saw the past few months is being sustained to carry growth from Q2 into the second half of the year,” said Millan Mulraine, deputy head of U.S. research and strategy at TD Securities USA LLC in New York, who projected a reading of 56.2.
Estimates in the Bloomberg survey of 75 economists ranged from 54 to 58. The index has averaged 54 so far this year, compared with 54.7 in 2013.
Stocks fluctuated as investors weighed the services data and another report on private employment. The Standard & Poor’s 500 Index fell 0.1 percent to 1,921.84 at 10:25 a.m. in New York.
Among other reports released Wednesday, companies in the U.S. added fewer workers than forecast last month. Employment rose 179,000 in May, the smallest gain in four months, after a 215,000 increase that was less than initially estimated, figures from the Roseland, N.J.-based ADP Research Institute showed.