Service Index Shows Growth

Cash-rich companies and consumers cheered by brighter job prospects kept U.S. service industries expanding last month, fueling economic growth heading into the second quarter, a survey released Wednesday suggests.

The Institute for Supply Management’s index of non-manufacturing businesses, including banks, builders and retailers, rose to 60.5 from 60.1 in February. Readings above 50 indicate growth.

Consumers flocked to retailers such as Best Buy Co. last quarter, helping spur economic growth estimated to be the fastest in two years. Service companies, which make up almost 90% of the economy, are also benefiting from corporate spending, which economists say will sustain the expansion.

“Services are growing at a respectable rate, enough to keep people busy,” Brian Bethune, an economist at Global Insight Inc. in Lexington, Mass., said before the report was released. “We’re motoring along without getting to a level where pricing pressures show up.”

Economists surveyed by Bloomberg News had expected the service index to fall to 59, the median of 62 forecasts. Estimates ranged from 56.5 to 62. Before today’s report, the index averaged 57.7 since its inception in July 1997.

In Europe, growth at service companies matched a five-year high last month as rising exports buoyed domestic economies, a report by NTC Research for Royal Bank of Scotland Group showed Wednesday. An index based on a survey of 2,000 purchasing managers in the 12 nations using the euro currency was at 58.2 for the second month.