Service industries in U.S. expanded at a slower pace

U.K. Services

A gauge based on a survey of purchasing managers fell to a 22-month low of 50.6 from 52.2 in September, Markit Economics and the Chartered Institute of Purchasing and Supply said in London today. That’s below the lowest estimate of 51 in a survey of 30 economists by Bloomberg. The median forecast was 52.

China’s services industries rebounded from the slowest expansion in at least 19 months, adding to manufacturing gains that indicate the world’s second-biggest economy is recovering from a seven-quarter slowdown.

The purchasing managers’ index rose to 55.5 in October from 53.7 the previous month, the National Bureau of Statistics and China Federation of Logistics and Purchasing said in Beijing on Nov. 3. A separate services index released today by HSBC Holdings Plc and Markit Economics in Beijing fell to 53.5 in October from 54.3.

A Labor Department report last week showed the U.S. job market is strengthening. Employers added 171,000 workers to payrolls in October, more than the most optimistic projection in a Bloomberg survey, after a 148,000 gain in September. The figures showed retail hiring picked up at the same time purchases firmed.

Macy’s Sales

Macy’s, the second-biggest U.S. department-store chain, said last week that its October same-store sales increased 4.1 percent, topping the 4 percent average estimate of analysts surveyed by researcher Retail Metrics Inc. Kohl’s said its purchases climbed 3.3 percent.

Same-store sales for the more than 20 companies tracked by Swampscott, Massachusetts-based Retail Metrics rose 5 percent, excluding drugstores, beating estimates for a 4.6 percent gain, the firm said in a Nov. 1 report. That followed a 3.9 percent increase in September.

Starbucks Corp., the world’s largest coffee-shop operator, reported record fourth-quarter revenue, while sales at stores open at least 13 months in the U.S., Canada and Latin America advanced 7 percent.

“If you look at the last few years, there is no question that the economic environment in the U.S. has been very challenging, fragile, and depending on the region, very difficult at times,” Chief Executive Officer Howard Schultz said on a Nov. 1 earnings call. Still, “we’re confident that we can continue to navigate through changes in the economy and we’ve done it now year-over-year.”

Bright Spot

Homebuilding is another bright spot for the economy. Americans bought new homes in September at the fastest pace in two years, a sign the industry at the heart of the last recession is bouncing back, according to Commerce Department figures.

Population growth and mortgage rates pushed to record lows by Federal Reserve purchases of housing debt are generating sales for builders like Toll Brothers Inc. Housing starts in September jumped 15 percent to the fastest pace since July 2008, according to the Commerce Department.

At the same time, the service industry may be held back by a weaker global economy and concerns about the so-called fiscal cliff of more than $600 billion in tax increases and government spending cuts set to occur if lawmakers fail to act by the end of the year.

“Corporate America is cautious ahead of the elections and fiscal cliff discussions, so it’s unlikely that we’ll see any uptick in the fourth quarter,” Vasant Prabhu, chief financial officer at Starwood Hotels & Resorts Worldwide Inc., said on an Oct. 25 earnings call.

Bloomberg News

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