WASHINGTON -- The service sector, a crucial driver of the U.S. economy, expanded more than forecast last month as business activity surged in a sign the partial government shutdown was not a drag on sales, a widely watched index indicates.
The Institute of Supply Management said Tuesday that its purchasing managers' index for the service sector rose to 55.4 in October from 54.4 the previous month. Economists had projected just a slight increase to 54.5.
Index readings above 50 indicate the sector is growing.
The increase came after the index tumbled in September from a more than five-year high in August.
Driving October's improvement was a 4.6-point rise in ISM's index for business activity, to 59.7, across the 18 industries it tracks. A gauge of employment in those industries also rose, climbing 3.5 points to 56.2.
But in a negative sign for future growth in the sector, the index for new orders dropped in October to 56.8 from 59.6 the previous month. It was the second straight monthly decline, pushing the new-order index to its lowest level since June.
ISM reported Friday that its U.S. manufacturing index also rose more than expected last month, coming in at 56.4, the highest in 2½ years.