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US Service Economy Strengthens in January: ISM

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US Service Economy Strengthens in January: ISM

The US service economy strengthened in January, as an uptake in business activity drove the fastest pace of employment growth in more than three years.

The Institute for Supply Management’s gauge of national services activity rose one percentage point to 54, narrowly exceeding estimates. Although the pace of growth eased in the latter half of 2013, January marked the 48th consecutive month the service economy was in expansion mode. The service economy rose to a more than seven-year high in August of last year.

Eleven of 18 non-manufacturing industries expanded last month, led by management of companies and support services. Agriculture and forestry were the next two fastest growing service industries, ISM data showed. Of the seven industries that declined in January, mining was the hardest hit, followed by entertainment and recreation, healthcare and transportation.

Employment activity expanded for the 25th consecutive month, led by management of companies and support services. Employment numbers are in-line with a separate report released today by the ADP Institute, which said the service economy added 160,000 payrolls last month.

“Business conditions continue to improve,” said one purchasing manager from the information industry.

“All phases of the business seem to be getting stronger,” said another manager from professional, scientific and technical services.

Major obstacles were reported by wholesale trade, as “Intense weather in several areas of the country is perceived to have contributed to a slow start in what otherwise is historically a strong month.”

Bad weather was partly to blame for the broad-based decline in manufacturing last month. ISM’s gauge of manufacturing output fell to an eight-month low in January. The ADP report today showed goods producing industries added only 16,000 payrolls last month, with manufacturing employment declining 12,000.

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