US services grow at faster pace for first time in five months

[WASHINGTON] Growth in America's service industries accelerated in March for the first time in five months, indicating the economy was improving after a sluggish start to the year.

The Institute for Supply Management's non-manufacturing index, covering industries including construction, finance and retailing, rose to 54.5 from 53.4 in February, the Tempe, Arizona-based group's data showed Tuesday. Readings above 50 signal expansion. The median forecast in a Bloomberg survey called for 54.2.

The pickup in the industries that account for almost 90 percent of the economy allays concerns that headwinds such as plunging commodity prices and lukewarm foreign demand were spilling more broadly across the US Reports last week showed the worst of the manufacturing slump is over, hiring is robust and wages are rising.

"The services sector is lining up toward moderate expansion," Gregory Daco, head of US macroeconomics at Oxford Economics Ltd in New York, said before the report. "The resilience in non-manufacturing is supported by strong payrolls growth and income growth. It is a reassuring sign that the economy isn't slowing any further." The estimates of economists in the Bloomberg survey for the ISM services index ranged from 52 to 55.5.

The group's factory survey released on April 1 showed manufacturing expanded in March for the first time in seven months, fueled by the strongest new orders since November 2014.

The ISM non-manufacturing survey covers an array of industries including utilities, retailing, housing and health care, in addition to construction and agriculture.

Details of the services survey showed the business activity index increased to 59.8 from the prior month's 57.8. The measure parallels the ISM's factory production gauge.

The new orders measure advanced to 56.7 from 55.5. A measure of supplier deliveries improved to 51 from 50.5.

The index of prices paid advanced to 49.1 from a more than six-year low of 45.5.

There was better news on the jobs front following February's weak reading that had triggered concern about service providers' staffing plans. The ISM services employment index rose to 50.3 in March from 49.7 the prior month.

The nation's labor market continues to strengthen, a Labor Department report showed Friday. Employers added 215,000 workers to payrolls in March after a 245,000 February advance, and average hourly earnings increased 0.3 per cent from a month earlier. The jobless rate edged up to 5 per cent as more people entered the labor force.

"On balance, overall employment has continued to grow at a solid pace so far this year, in part because domestic household spending has been sufficiently strong to offset the drag coming from abroad," Federal Reserve Chair Janet Yellen said in a March 29 speech.


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