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Service industries in US expand at faster pace than forecast

[WASHINGTON] America's service providers expanded more than forecast last month, spurred by an upturn in orders that coincided with stepped-up demand at the nation's factories.

The Institute for Supply Management said Thursday that its non-manufacturing index held at 57.2 in December, the highest level since October 2015. The median forecast in a Bloomberg survey called for 56.8. Readings above 50 signal growth in the industries that make up nearly 90 percent of the economy.

Bookings at service producers were the strongest since August 2015, helping explain a pickup in business sentiment about the economy since the presidential election in November. The ISM's measure of service-related business activity, which parallels manufacturing output, was near the highest in more than a year."We have a very strong finish to 2016," Anthony Nieves, chairman of the ISM non-manufacturing survey, said on a conference call with reporters. After the year-end holidays, "there tends to be a little lull or pullback, but when we look at the new orders index remaining strong, I'd be hard-pressed to see how much it may come off, if at all."

Earlier this week, the Tempe, Arizona-based supply management group said that its index of manufacturing reached a two-year high last month, powered by the biggest monthly increase in orders growth since August 2009.

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Together, the reports indicate the economy will gain momentum in 2017 after a projected soft fourth quarter as American industry prepares for a change in government leadership. President-elect Donald Trump has said he aims to boost economic growth and increase hiring by taxing less and reducing regulations.

The ISM services survey covers a range of industries, including retail, health care, agriculture and construction. Estimates in the Bloomberg survey ranged from 55 to 58. The December figure exceeds the 54.8 average from January through November 2016. It matches the average for all of 2015.

Twelve out of 18 industry groups, including mining, retail, finance and construction, expanded in December. Public administration, wholesale trade and agriculture and forestry contracted.