An index of U.S. service industries rose to a record in January and factory orders in December
increased to the highest level in three years, suggesting the economy is strengthening from the fourth quarter.
The Institute for Supply Management’s index for non- manufacturing businesses jumped to 65.7, the highest since the survey’s inception in July 1997 and exceeding forecasts, from 58 in December. Since April, the gauge has held above 50, signaling expansion. Orders placed with manufacturers in December rose 1.1 percent to $342.3 billion, the Commerce Department reported.
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Increased manufacturing may bring even greater demand for services from companies including United Parcel Service Inc., suggesting growth is quickening from the fourth quarter’s 4 percent pace, economists said. Shippers, retailers, builders and other services account for 85 percent of the economy.
“There is good momentum that is covering a wider range of industries,” said Peter Kretzmer, a senior economist at Banc of America Securities LLC in New York. “The reports continue to show solid growth. Capital spending is continuing to grow and broadening to other areas. We are looking for consumer spending to be a little stronger” this quarter.
Economists expected the institute’s index to rise to 60, from 58.6, the median of 53 estimates in a Bloomberg News survey. Estimates ranged from 56.5 to 64.5. A 0.2 percent rise was
forecast for December factory orders, according to a separate Bloomberg survey. The value of orders was the highest since $342.4 billion in December of 2000.
Bloomberg News
