Growth in US Services Firms Picked Up Speed Last Month

U.S. service firms' growth accelerated in April, fueled by more orders, rising sales and an uptick in hiring.

The Institute for Supply Management said Tuesday that its services index rose to 57.8 in April from 56.5 in March. The April reading is its highest level in five months. Any reading over 50 indicates that service providers are expanding.

The healthy showing suggests that the economy's recent stumbles are only temporary.

Hiring slowed in March and economic growth ground to a near-halt in the first quarter. But most economists expect growth will rebound in the coming months.

A measure of hiring ticked up one-tenth of a percent to 56.7, its third straight increase. That suggests the April jobs report, to be released Friday, will show greater job gains than in March, when hiring fell to 126,000, the slowest in 15 months.

Service providers are mostly avoiding the hurdles that have slowed growth among manufacturers and weighed on the broader economy. Factory production has fallen as the strong dollar has made American goods more expensive overseas. A sharp fall in oil prices in the past year has also caused drilling companies to spend less on rigs and equipment, which has cut into the production of steel and industrial machinery.

The ISM's report also indicates that Americans stepped up their spending in April, after cutting back and boosting savings in the first three months of the year. A measure of sales jumped 4.1 points to 61.6, also the highest in five months.

Sluggish consumer spending contributed to a sharp slowdown in growth in the first quarter. The economy expanded at just a 0.2 percent annual rate, down from a 3.6 percent pace in the second half of last year.

Economists blamed much of the slowdown on harsh winter weather and other temporary factors, such as a labor dispute at West Coast ports that disrupted the shipping of parts and raw materials. But some factors, such as the strong dollar, will likely persist for much of the rest of the year.

The ISM is a trade group of purchasing managers. Its survey of services firms covers businesses that employ 90 percent of the American workforce, including retail, construction, health care and financial services companies.