Service Sector Expands at Fastest Pace in 5 Years
Service sector expands in January at fastest pace since 2005 on higher orders, employment
By CHRISTOPHER S. RUGABER AP Economics Writer
WASHINGTON February 3, 2011 (AP)
The U.S. service sector, which employs nearly 90 percent of the work force, grew in January at the fastest pace in five years, a sign that hiring could pick up soon.
The Institute for Supply Management, a private trade group, said Thursday its index of service sector activity rose to 59.4 last month, up from December's reading of 57.1. That's the 14th straight month of growth. Any reading above 50 indicates expansion.
The report follows a strong reading on Monday from the institute's manufacturing index for January, which rose to its highest level in nearly seven years.
The service index measures a broad sector of the economy, including retailers, hotels, health care companies and financial firms.
The institute's services employment index rose to 54.5, the highest since May 2006. The employment indexes in the manufacturing and service sector indexes both rose in January, a positive sign that the economy may soon generate more jobs.
And the factory orders report came out today also. The durable goods orders component from last week was revised upward.
Orders to U.S. Factories Unexpectedly Increased in December
By Bob Willis - Feb 3, 2011 7:00 AM PT
American factories unexpectedly received more orders in December, led by demand for capital equipment that was stronger than reported last week.
The 0.2 percent increase in bookings topped the median forecast of economists surveyed by Bloomberg News which called for a 0.5 percent drop, figures from the Commerce Department showed today in Washington. Orders for non-defense capital goods excluding aircraft rose 1.9 percent, up from the 1.4 percent gain the government estimated in last week’s durable goods report.
Manufacturers like Caterpillar Inc. are reporting increased demand from U.S. consumers, businesses and customers in developing countries like Brazil and China. Tax breaks for business investment passed last month may provide further momentum to the factory rebound this year.
“We’re seeing a pretty solid rebound in demand for manufactured goods,” Russell Price, a senior economist at Ameriprise Financial in Detroit, said before the report. “That is exactly what we need to see at this point to make this a self- sustaining recovery.”