Growth in U.S. services unexpectedly accelerated in August

European Economy

In the euro area, a services index increased to 50.7 in August from 49.8 in July.

Among non-manufacturing industries in the U.S., home- improvement retailers are enjoying increased sales as the housing market recovery. Lowe’s Cos. Chief Executive Officer Robert Niblock said the market’s growth depends on how much higher mortgage rates affect Americans’ buying decisions.

The average rate on a 30-year fixed mortgage climbed to a two-year high of 4.58 percent on Aug. 22 after reaching a recent low in May of 3.35 percent, data from Freddie Mac show.

“The stronger-than-expected pace of home-improvement industry growth so far this year was fed by modestly stronger gains in housing turnover and job growth than originally forecast, further offsetting the negative effects of higher taxes,” Niblock said on an Aug. 21 conference call.

Mortgage Rates

Higher mortgage rates, they “shouldn’t derail it as long as job gains persist, homes continue to appreciate, and rates rise more gradually going forward,” he said.

A report tomorrow from the Labor Department is projected to show employers stepped up the pace of hiring in August, taking on 180,000 workers after adding 162,000 a month earlier, according to the median forecast in a Bloomberg survey.

Job gains and cheaper financing by some automakers are spurring motor vehicle demand. Cars and light trucks sold last month at a 16 million annualized rate, the fastest since October 2007, according to Ward’s Automotive Group data.

General Motors Co. recorded its best month since 2008 and Ford Motor Co. its strongest month of retail sales since 2006. Chrysler Group LLC sales rose for the 41st straight month.

Americans spending more on cars and housing helped the economy maintain a “modest to moderate” pace of expansion from early July through late August, even as borrowing costs increased, the Federal Reserve said yesterday.

“Consumer spending rose in most districts, reflecting, in part, strong demand for automobiles and housing-related goods,” the Fed said. “Residential real estate activity increased moderately in most districts, and demand for nonresidential real estate gained overall.”

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