U.S. service industries expand at faster pace than forecast

Factory Gauge

The group’s manufacturing index, released Sept. 4, showed the industry contracted for a third month in August, the longest such stretch since the recession ended in 2009. The ISM services survey covers industries ranging from utilities and construction to health care and finance

Stronger retail sales, along with a pickup in the housing market, have helped sustain growth in the services industry. In July, retail purchases advanced 0.8 percent, the most since February, Commerce Department data show. Auto demand has also fared well, with sales of cars and light trucks rising to an annual rate of 14.5 million in August, the best in three years.

New home construction ran at a 746,000 annual rate in July, close to June’s 754,000 pace that was the strongest in more than three years, according to the Commerce Department.

At the same time, the services industry may be held back by a struggling labor market. Payroll gains have failed to bring the jobless rate below 8 percent for more than three years.

Consumer Spending

Higher gasoline prices could also keep consumer spending in check. The average price of a gallon of regular gas has risen 50 cents since July 1, reaching $3.83 at the end of August, according to AAA, the nation’s largest auto club.

FedEx is among U.S. companies saying slower economic growth is hurting demand for their services. The world’s biggest cargo airline operator this week projected its first earnings decline since 2009 for the three-month period that ended Aug. 31.

“Weakness in the global economy constrained revenue growth at FedEx Express more than expected in the earlier guidance,” the company said in a Sept. 4 statement. Express packages provide most of FedEx’s sales, and the Memphis-based shipper is considered an economic bellwether because it moves goods ranging from financial documents to pharmaceuticals.

Bloomberg News

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