Service industries in U.S. grow at faster pace than forecast

Service industries in the U.S. expanded in October at a faster pace than forecast, showing the biggest part of the economy was holding up as the federal government shut down.

The Institute for Supply Management’s non-manufacturing index increased to 55.4 from the prior month’s 54.4, the Tempe, Arizona-based group said today. A gauge above 50 shows expansion. The median estimate in a Bloomberg survey of economists was 54.

The pickup followed the group’s report last week that showed manufacturing grew at the fastest pace since April 2011, a sign purchasing managers were gaining confidence in the expansion. The data indicate companies were looking beyond the political infighting that closed the government for half of October.

Considering the shutdown’s effects, “some of the areas with closer ties to Washington were probably negatively impacted, but the rest of the economy seems to have done okay,” Mark Vitner, a senior economist in Charlotte, North Carolina, at Wells Fargo & Co., the biggest U.S. home lender, said before the report. “The non-manufacturing side has been pretty solid.”

Estimates of the 79 economists in the Bloomberg survey for the October reading ranged from 52 to 56.3. From July 2009, a month after the last recession ended, through September the index had averaged 53.9.

The figure includes industries that range from utilities and retail to health care, housing and finance and make up almost 90% of the economy.

The ISM’s measure of business activity increased to 59.7 from 55.1, the report showed. A gauge of employment in non- manufacturing industries rose to 56.2 from 52.7.

Orders Cool

The group’s measure of new orders in the service industries decreased to 56.8 last month from 59.6 in September.

The ISM’s manufacturing index, released last week, unexpectedly rose to 56.4, the highest since April 2011, from 56.2 a month earlier as improving export markets accompanied a boost in domestic demand.

Service industries in some parts of the world are on the mend. Services in the U.K. unexpectedly accelerated in October at the fastest pace in 16 years as the economy showed signs of pulling away from the rest of Europe. A gauge of activity rose to 62.5 from 60.3 in September, Markit Economics said today in London.

The report came as the European Commission forecast the U.K. economy will grow 2.2% next year, twice the pace of the euro area and more than Germany and France.

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