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Services Industry in U.S. Grew Less Than Forecast in December

Thursday, 05 January 2012 10:56 AM

Service industries in the U.S. expanded less than forecast in December, indicating improvement in the economy will be uneven.

The Institute for Supply Management’s index of non- manufacturing industries, which account for almost 90 percent of the economy, rose to 52.6 last month from 52 in November, the Tempe, Arizona-based group said today. The median forecast of economists surveyed by Bloomberg News called for an increase to 53. Fifty is the dividing line between expansion and contraction.

Slow wage growth, limited job gains and depressed real estate values may make it tougher for Americans to boost their spending after the holiday shopping season. For the service companies doing business overseas, a slowdown in the global economy remains an obstacle.

“Services are sluggish,” Steven Ricchiuto, chief economist at Mizuho Securities USA Inc. in New York, said before the report. “We’ve got enormous headwinds for the consumer, with deleveraging and corporate reluctance to hire.”

The services figure for December was the second-lowest since January 2010. Estimates of the 65 economists in the Bloomberg survey ranged from 52 to 55. The group’s index averaged 53.1 since the recession ended in June 2009.

The survey’s employment gauge rose to 49.4 in December from 48.9. The measure of new orders was little changed at 53.2 after 53 in November. A gauge of business activity held at 56.2. The index of prices paid decreased to 61.2 from 62.5.

Two other reports today showed the labor market is improving. Companies added 325,000 workers to their payrolls in December, the most since record-keeping began in 2001, after a 204,000 gain the prior month, according to Roseland, New Jersey- based ADP Employer Services. The gain topped the highest estimate in a Bloomberg survey of economists.

Jobless Claims

First-time claims for jobless benefits declined 15,000 last week to 372,000, the Labor Department said. The average over the past four weeks fell to the lowest level in more than three years.

Figures from the agency tomorrow may show the economy generated 150,000 jobs in December after 120,000 the prior month, according to economists surveyed by Bloomberg. The unemployment rate rose to 8.7 percent after falling to 8.6 percent a month earlier, according to the forecasts.

The report may also show private employment, which excludes government jobs, climbed 175,000 last month after a 140,000 gain.

Retail Sales

Retail sales at stores open more than a year may have gained as much as 4.5 percent in December, more than previously estimated, as discounts attracted holiday shoppers, the International Council of Shopping Centers said in a statement yesterday.

Demand at Ford Motor Co., General Motors Co. and Chrysler Group LLC exceeded analysts’ forecasts in December, other data showed yesterday. Ford’s U.S. sales climbed 10 percent from a year earlier, while purchases of Chrysler vehicles were up 37 percent. At GM, they increased 4.5 percent from a year earlier.

“The growth we’re seeing is still based on” a slow increase in jobs, Don Johnson, vice president at GM for U.S. sales, said on a conference call with analysts. “Consumers are more confident and other underpinnings of our economy are either stable or slowly improving.”

Consumer confidence climbed to an eight-month high in December, according to Conference Board figures last month.

The service industry report follows the group’s manufacturing data this week that showed an acceleration in orders and production. The ISM’s index climbed to 53.9 last month from 52.7 in November.

“The economy has been expanding moderately, notwithstanding some apparent slowing in global growth,” Federal Reserve policy makers said Dec. 13 after their latest meeting.

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Thursday, 05 January 2012 10:56 AM
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