Service Sector Grows at Fastest Pace Since 2000

The service sector in May grew at its fastest pace since August 2000, reinforcing expectations for a moderate recovery from recession, a survey found Wednesday.

The Institute for Supply Management, an industry trade group, said its monthly non-manufacturing index of activity in everything from entertainment to financial services rose last month to 60.1 from 55.3 in April, reaching the highest level since the economic downturn began in late 2000.

Analysts had forecast a rise to 55.9. A reading above 50 signals growth, while one below 50 suggests contraction.

Earlier this week ISM’s closely watched manufacturing index showed the sector growing in May at its fastest pace since February 2000, adding to recent evidence of a broadening U.S. recovery.

Economists and Fed officials are looking for signs of stronger business investment and consumer spending later in the year to ensure that the economy’s rebound does not falter.

ISM’s new-orders index rose to 56.8 in May from 56.4 in April, while the order backlog index posted its first growth in 17 months--signaling rising demand for future services activity that could push the index higher next month.

Although the employment index rose in May to 49.5 from 48.9 in April, it still indicated a 15th straight month of job losses. But the index moved closer to the 50 threshold that would signal job growth.

The prices-paid index fell in the month to 55.5 from 59.5, indicating that prices are rising at a slower pace and soothing some worries about building price pressures.

ISM compiles its non-manufacturing index by surveying more than 370 purchasing executives in more than 62 service industries once a month.