US Service Economy Reaches Highest Level since January 2008: ISM
The US service economy accelerated at a faster pace in July, as a surge in new orders supported another strong month of job creation.
The Institute for Supply Management’s gauge of national service activity rose from 56 to 58.7, its highest level since January 2008. A median estimate of market analysts called for a slight gain to 56.3.
The US service economy has been above the 50 mark that separates expansion from contraction for 54 consecutive months.
Sixteen non-manufacturing industries expanded last month, led by construction, educational services, and public administration. The only industry to report contraction last month was utilities.
Overall business activity surged in June, as 13 service industries reported growth. The gains were led by mining, arts, entertainment and recreation, and public administration. The only industry to report contraction in business activity was utilities.
New orders rose at a faster pace in July, climbing for the 60th consecutive month. The new orders sub-index rose 3.7 percentage points to 64.9, as 14 sub-sectors reported growth, led by educational services, mining, and real estate.
“Conditions are improving,” said one representative of the construction industry.
“Slight improvement in the economy, but still experiencing delays in client project start-ups. Expecting some improvement in the fourth quarter,” said one purchasing manager from the professional, scientific and technical services field.
“Second half of the year is looking promising for increased orders versus last year,” said another representative from the information sector.
The US economy expanded at an annual rate of 4 percent in the second quarter, the Commerce Department reported last week. Economists expect the recovery to deepen in the second half of the year as the economy fully recovers from the first quarter slowdown.
Service sector employment rose for the fifth consecutive month and at a faster pace, as 13 industries reported an increase in hiring. Employment growth was led by other services, construction and wholesale trade, ISM data showed.
The US economy added 209,000 nonfarm payrolls in July, marking the sixth consecutive month employment growth was above the 200,000 mark. That’s the first stretch of its kind since 1997. The service economy accounted for the bulk of the increase, adding 140,000 payrolls.
The unemployment rate edged up 0.1 percentage points to 6.2 percent as more people entered the labour force.
The US economy in 2014 has added an average of 231,000 jobs each month. The labour market reached a significant milestone earlier this year after it finally regained all of the jobs that were destroyed following the 2007-08 financial crisis.
Additionally, job growth numbers for May and June were revised up by 15,000.
Separately, Markit Group said service sector growth remained elevated in July, despite slower rises in new work and job creation. Markit’s gauge of US service activity eased from 61 to 60.8.
“The economy enjoyed a very strong start to the third quarter,” said Markit chief economist Chris Williamson in a statement. “The surveys suggest that the economy has maintained strong momentum after rebounding in the second quarter from the weather-torn start to the year.”
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