US service sector growth accelerates in October

WASHINGTON (AFP) – The vast US services sector rebounded in October with a broad pick-up in activity after two months of declines, the Institute for Supply Management said Wednesday.

The ISM’s purchasing managers index for activity in the non-manufacturing sector, representing more than 80 per cent of the US economy, jumped to 59.1 in October from 56.9 in September.

The October rebound surprised analysts, who on average forecast a dip to 56.6.

A reading above 50 indicates growth, and October marked the 69th consecutive month of expansion in the service sector.

“Services entered the fourth quarter with solid momentum and will propel the economy forward in the near term,” said Michael McGrane of Moody’s Analytics.

Faster growth was seen in most measures of the PMI data. Business activity and production advanced 2.8 points to 63.0 and new orders soared 5.3 points to 62.0.

Price falls slowed in October, with a slight rise bringing the reading to 49.1, still in contraction territory.

“Respondents remain mostly positive about business conditions and the overall economy,” said Anthony Nieves, head of the ISM non-manufacturing survey committee.

Fourteen of the 18 industries surveyed reported growth in October, led by transportation and warehousing, and health care and social assistance.

Only one industry, mining, reported a contraction, reflecting the pressures on production from falling energy prices.

“Overall business and volume have been very consistent and strong the past month,” said a survey respondent in retail trade.

“Currently building inventories and work force for Q4, holiday, and peak seasons,” said a person in the transportation and warehousing sector.

The upbeat PMI report could signal strength in Friday’s October jobs report, McGrane said.

“The employment index edged higher and now sits at its highest level since July, boding well for October payroll employment after a disappointing September payroll report.”

The Labour Department is expected to report Friday the economy added 181,000 jobs in October, after a modest 142,000 the prior month, with the unemployment rate holding steady at 5.1 per cent.