Service economy expands faster
The nation’s service economy grew in October at a quicker pace than in September and faster than analysts had expected, according to a survey released Friday.
The Institute for Supply Management, a nonprofit organization, said its index of business activity for the service sector registered 57.1 in October. That’s above September’s reading of 52.9, which was a three-year low, and August’s reading of 57.
Analysts had been predicting 54.5.
The service sector, which includes banking, construction, retail and travel, generates about two-thirds of the nation’s economic activity.
A reading above 50 signals expansion, and a reading below 50 indicates contraction.
“The economy is still humming. It appears that the fourth quarter is off to a good start,” said Stuart Hoffman, chief economist at PNC Financial Services Group Inc. He added, however, that the pace was slower than a year ago, so it should be a “good, not great” holiday season for businesses.
Last October, the index for the nonmanufacturing sector was at 60. The economy has been slowing over the last several months, largely because of the slumping housing market.
The report of expanding growth in the service sector came on the heels of a Labor Department report earlier Friday that the unemployment rate dropped to a five-year low of 4.4% in October as employers added a net 92,000 jobs. The rate was down from 4.6% in September and marked the third consecutive monthly jobless rate decline.
Hoffman pointed out that the institute’s snapshot of the manufacturing sector Wednesday was bleaker than Friday’s picture of the service sector.
“That’s consistent with the employment report. All of the job strength was in the service sector,” he said.
The service sector report indicated inventories grew at a faster pace, with the inventories index rising to 53 from 50.5 in September. The new export orders index rose to 63.5 in October from 59 in September.
The industries contributing most to the uptick were utilities, information and retail trade. The industries reporting the biggest drops in activity were housing-related, including real estate and rental and leasing.
