Tags: orders | service | industries | sales

Orders Propel Service Industries as Sales Improve

Monday, 05 May 2014 11:17 AM

Services, the biggest chunk of the U.S. economy, picked up in April, powered by gains in orders and sales that signal even faster growth ahead.

The Institute for Supply Management’s non-manufacturing index rose to 55.2, the highest level since August, from 53.1 in March, the Tempe, Arizona-based group’s report showed today. Readings above 50 indicate expansion. Bookings jumped by the most in four years.

Industries ranging from retailers to restaurants and construction companies were among the 14 sectors reporting growth last month as the world’s biggest economy rebounds from a weak first quarter. A rebound in hiring sets the stage for a pickup in consumer spending that will benefit companies such as United Parcel Service Inc.

“The economy has started the quarter with a lot of momentum,” said Markus Schomer, chief economist at PineBridge Investments LLC in New York, who projected the index would rise to 55. “We have moderate but accelerating growth, inflation is no longer falling, and the Federal Reserve is expected to keep rates very low for a very long time.”

The median forecast in a Bloomberg survey called for 54 in the gauge for services, which account for almost 90 percent of the economy. Estimates from 69 economists ranged from 52 to 55.6. The index has averaged 53.7 since the recession ended in June 2009.

Stocks were little changed after the figures. The Standard & Poor’s 500 Index rose less than 0.1 percent to 1,881.55 at 10:55 a.m. in New York.

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

Another report from London-based Markit Economics showed little change in growth at services in April. A final reading for the month eased last month to 55 from 55.3 in March. The gain in bookings from the prior month was the most since March 2010.

Industries Expanding

The ISM’s gauge of business activity climbed to 60.9 in April from 53.4, the biggest increase since February 2008. Orders jumped to an eight-month high of 58.2 from 53.4.

“Confidence is building,” Anthony Nieves, chairman of the survey, said on a conference call with reporters. “Employment has to increase in this sector if business keeps growing.”

The employment gauge decreased to 51.3 from 53.6, while the index of orders waiting to be filled dropped to 49 from 51.5.

The index of prices paid increased to 60.8 from 58.3.

Manufacturing Strengthens

An ISM report last week showed U.S. manufacturing accelerated in April. The group’s factory index climbed to 54.9, the strongest so far this year.

The figures show the expansion in the U.S. is gathering pace, while China cools and Europe struggles to pick up. Chinese manufacturing contracted for a fourth month in April, figures from HSBC Holdings Plc and Markit said today.

The European Commission in Brussels forecast the 18-nation euro area will expand 1.7 percent in 2015, compared with a previous forecast of 1.8 percent.

The U.S. manufacturing sector accounts for about 12 percent of the economy. Sales are increasing at automakers such as General Motors Co., while a pickup in demand as the weather warms will help other companies such as Whirlpool Corp.

Employment Gains

Demand is getting a boost as more Americans find work. Labor Department figures last week showed America’s job-creation machine kicked into higher gear in April. The 288,000 gain in payrolls exceeded the median forecast in a Bloomberg survey and followed a 203,000 advance in March. The unemployment rate fell to 6.3 percent, the lowest level since September 2008.

UPS, the world’s largest package-delivery company, is among businesses that anticipate more demand after a winter-depressed quarter. Atlanta-based UPS is viewed as an economic bellwether because it delivers a variety of goods, from financial documents to electronics and appliances, around the globe.

“We expect the pace of U.S. economic growth to pick up as 2014 progresses,” Scott Davis, chief executive officer, said on an earnings call on April 24. “The macroeconomic environment looks decent as we move forward” in U.S. and global markets.

MasterCard Inc., the second-biggest payments network, on May 1 reported first-quarter profit that beat analysts’ estimates as customers increased spending using their credit and debit cards.

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Services, the biggest chunk of the U.S. economy, picked up in April, powered by gains in orders and sales that signal even faster growth ahead.
orders, service, industries, sales
Monday, 05 May 2014 11:17 AM
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