Dec. 5, 2012, 10:49 a.m. EST
U.S. service sector accelerates in November Business climbs to fastest level since late winter, but hiring softer
By Jeffry Bartash, MarketWatch
WASHINGTON (MarketWatch) — U.S. service companies such as insurers and health-care providers grew at a somewhat faster pace in November, marking the 35th straight month of expansion.
The Institute for Supply Management on Wednesday said its services index edged up to 54.7% last month from 54.2% in October. A number over 50 means more companies are expanding instead of shrinking.
Economists surveyed by MarketWatch had expected the ISM services index to drop to 53.0%.
New orders and business activity both surged last month to push the overall index higher. New orders, a harbinger of future demand, jumped 3.3 points to 58.1% and business activity climbed 5.8 points to 61.2%.
The reading for new orders was the highest since March and the business-activity index reached its biggest peak since February.
Also, an index that measures the costs service companies pay for supplies fell sharply, down 8.6 points to 57.0%.
“The majority of survey respondents reflect a cautious optimism about current economic conditions,” said Anthony Nieves, who’s in charge of the firm’s service-sector index.
By contrast, manufacturers are not performing nearly as well. Earlier this week, the ISM said its manufacturing index fell back into negative territory for the fourth time in six months. The gauge retreated to 49.5% in November from 51.7% in the prior month.
Yet like the manufacturing sector, service companies have grown more cautious about hiring. The employment gauge fell 3.3 points to 50.3%, the lowest level since mid-summer.
The services side of the economy employs about four of every five U.S. workers. If they are more reluctant to hire, job growth is unlikely to accelerate much and sharply reduce the nation’s 7.9% unemployment rate.
Of the 18 service sectors tracked by ISM, 11 reported growth. That’s down from 13 in October and 12 in September.
Service companies are somewhat more insulated from ups and downs in the domestic or global economies because people need things like doctor’s visits or the advice of accounts even when times are bad.
Six industries said growth fell in November, compared to five in October.
Jeffry Bartash is a reporter for MarketWatch in Washington.
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