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, Ariz.-based group’s report showed Monday. 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, Ill., 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 1,878.11 at 10:36 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.
Another report from London-based Markit Economics showed little change in growth at services in April. A final reading for the month eased last month to 55 from 55.3 in March.
Fourteen service industries reported growth in April, while four said business contracted, Monday’s ISM 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.