US service industries’ expansion in April fastest in 8 months

Service industries expanded in April at the fastest pace in eight months, a sign the biggest part of the US economy will bolster growth this quarter.

The Institute for Supply Management’s non-manufacturing index rose to 55.2, higher than projected, from the prior month’s 53.1, the Tempe, Arizona-based group’s report showed yesterday. Readings above 50 indicate expansion.

The gain, combined with the strongest pace of manufacturing in four months, indicates growth is rebounding after a weak first quarter. Employers boosted payrolls in April by the most in two years and the jobless rate dropped to the lowest level since 2008, laying the ground for a pickup in consumer spending that will benefit companies such as United Parcel Service.

“Things are getting better,” Robert Stein, deputy chief economist at First Trust Portfolios in Wheaton, Illinois, said before the report. “Among the top line numbers, we’re seeing a re-acceleration of the economy. Consumers are in excellent shape” and “spending is going to continue to grow this quarter.”

Estimates from 69 economists in the Bloomberg survey ranged from 52 to 55.6. The index has averaged 53.7 since June 2009.

Stocks held losses after the figures as financial shares declined, a measure of Chinese manufacturing missed estimates and violence spread in Ukraine. The Standard & Poor’s 500 Index dropped 0.2% to 1,876.76 at 10.18am 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.

Fourteen service industries reported growth in April, while four said business contracted, the report showed. The group’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. The 4.8 point gain from a month earlier was the most since March 2010.

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.

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