Growth in U.S. services unexpectedly accelerated in August

Growth in U.S. service industries unexpectedly accelerated in August as orders picked up, showing further progress in the world’s biggest economy.

The Institute for Supply Management’s non-manufacturing index increased to 58.6 from 56 the prior month, a report from the Tempe, Arizona-based group showed today. The median projection in a Bloomberg survey of economists called for a decline to 55. Readings above 50 indicate growth in the industries that make up almost 90 percent of the economy.

The pickup followed the group’s report this week that showed manufacturing grew the most since June 2011, indicating the four-year economic expansion is broadening. The rebound in housing is reverberating through the rest of the economy and driving sales at companies such as Lowe’s Cos. at the same time car dealers benefit from increased demand for new vehicles.

“The service sector will continue to expand,” Harm Bandholz, chief U.S. economist at UniCredit in New York, said before the report. “I’m positive on the economic outlook for the coming quarter. Housing has been strong. Credit is improving and the job market is improving.”

Estimates of the 78 economists in the Bloomberg survey ranged from 53.5 to 57.5 for the index, which includes industries from utilities and retail to health care, housing and finance. The gauge has averaged 53.7 since the recession ended in June 2009, before today’s report.

New Orders

The ISM non-manufacturing survey’s measure of new orders increased to 60.5 in August, the highest since February 2011, from 57.7 the month earlier. A gauge of business activity climbed to 62.2 from 60.4.

A measure of employment in non-manufacturing industries rose to 57 from 53.2 in July.

The group’s factory index earlier this week showed manufacturing, which accounts for about 12 percent of the economy, rose to 55.7 in August, the strongest since June 2011, from 55.4 a month earlier.

Service industries in other parts of the world are showing signs of stabilizing or improving outright. U.K. services growth unexpectedly accelerated last month, indicating the economy is gaining momentum. A gauge of services activity increased to 60.5 from 60.2 in July, the highest since December 2006, Markit and the Chartered Institute of Purchasing and Supply said in a statement yesterday.

Markit’s gauge of new business at services companies rose to the highest in more than 16 years in August. Construction grew at the fastest pace in six years and manufacturing expanded the most in more than two years, it said earlier this week.

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