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

Employment Gains

A gauge of employment in non-manufacturing industries rose to 55.8 from a six-month low of 52.5 in November. Business activity eased to 55.2 from 55.5, the report showed.

The ISM’s manufacturing index, issued Jan. 2, eased to 57 in December from 57.3 a month earlier, which was the highest level since April 2011. Measures of orders and employment advanced, with the latter reaching its highest level since June 2011.

Motor vehicle dealers were among those benefiting from stronger auto sales in 2013. U.S. auto sales increased 7.6% last year to 15.6 million, the best for the industry since 2007, even as December purchases fell short of analysts’ estimates, rising 0.3% to 1.36 million, according to Autodata Corp. Cold weather may have kept buyers from dealers’ lots.

 Housing Recovery

The housing recovery has also been a bright spot for the economy, creating jobs and driving demand for home-related goods. Construction spending climbed 1% in November, the Commerce Department said last week, with outlays reaching the highest point since March 2009. Though rising mortgage rates have slowed the pace of purchasing, a lack of inventory is keeping builders busy.

“The fundamental drivers of a housing recovery remain in place, although conditions are not as favorable as they were six months ago,” said Jeffrey T. Mezger, chief executive officer at Los Angeles-based KB Home, in a Dec. 19 earnings call. “Resale inventory levels have been slowly increasing but still remain low by historical standards. Affordability is at attractive levels, demographics remain strong and there’s pent-up demand due to delayed household formation.”

Fed’s Bernanke

Federal Reserve Chairman Ben S. Bernanke said in a Jan. 3 speech in Philadelphia that the headwinds that have held back the economy may be abating.

“The combination of financial healing, greater balance in the housing market, less fiscal restraint, and, of course, continued monetary policy accommodation bodes well for U.S. economic growth in coming quarters,” he said in prepared remarks.

A stronger economy and improvement in the labor market prompted the Fed to dial back its bond-buying program aimed at bolstering the expansion. The central bank announced in December that it would reduce its monthly purchases to $75 billion from $85 billion.

December employment data, due out at the end of this week, is projected to show the job market sustained momentum. The median forecast in a Bloomberg survey calls for a 195,000 increase in payrolls.

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