Services growth near nine-year high propels U.S.

Service providers from U.S. retailers to builders expanded in November at the second-fastest pace in more than nine years, indicating the world’s largest economy is forging ahead through a global slowdown.
The Institute for Supply Management’s nonmanufacturing index rose to 59.3, the second-highest level since August 2005, from 57.1 in October, the Tempe, Ariz.-based group said last week. The figure exceeded the highest projection in a Bloomberg survey of 78 economists.
The report “suggests continued momentum in fourth-quarter growth,” said Samuel Coffin, an economist at UBS Securities LLC in New York who is among the best forecasters of the services gauge in the past two years, according to data compiled by Bloomberg. “Confidence has been moving up and household wealth has been picking up for a while. The whole household sector is doing pretty well.”
More service industries than at any time since March 2010 reported an increase in bookings as falling gasoline prices and unemployment put American consumers in a better position to spend. Cars rolled off auto dealer lots last month at the second-fastest pace in eight years and Wal-Mart Stores Inc. said it had a record number of orders through its website two days ago.
The labor market continued to make steady progress last month as well, another report showed. Private payrolls climbed 208,000 in November after a revised 233,000 gain a month earlier, Roseland, N.J.-based ADP Research Institute said. Employment at service providers rose by 176,000, the group said.
It’s “steady as she goes in the job market,” Mark Zandi, chief economist at Moody’s Analytics Inc., said in a statement. Moody’s produces the figures with ADP. “At this pace the unemployment rate will drop by half a percentage point per annum. The tightening in the job market will soon prompt acceleration in wage growth.” The Federal Reserve said last week in its Beige Book business survey, based on reports gathered on or before Nov. 24, that “employment gains were widespread across districts.” Consumer spending kept rising, helped in part by lower fuel prices, and “a number of districts also noted that contacts remained optimistic about the outlook for future economic activity.”
American service providers are faring better than their competitors abroad. Growth at euro-area services companies deteriorated in November to the lowest level this year, according to figures from Markit Economics in London.
Fourteen U.S. nonmanufacturing industries reported growth in their businesses last month, led by retailers and construction companies, while the same number indicated a pickup in orders, the ISM’s report showed. The survey covers an array of sectors, including utilities, retailing, health care and finance that make up almost 90 percent of the economy. It also encompasses construction and agriculture.
The median forecast of economists in the Bloomberg survey was 57.5, with estimates ranging from 54.4 to 59.1. Figures above 50 indicate expansion. The nonmanufacturing index has averaged 56.3 this year, compared with 54.7 in all of 2013. November’s reading was just shy of the nine-year high of 59.6 reached in August. •