U.S. service-sector gauge up a bit

Capital-goods orders, worker productivity revised higher

An employee of Nautic Global Group welds an end cap onto an aluminum pontoon at a factory in Elkhart, Ind., on Tuesday. Orders in October for business equipment such as machinery and communications gear rose more than previously estimated, the Commerce Department said.

An employee of Nautic Global Group welds an end cap onto an aluminum pontoon at a factory in Elkhart, Ind., on Tuesday. Orders in October for business equipment such as machinery and communications gear rose more than previously estimated, the Commerce Department said.

Thursday, December 6, 2012

— U.S. service companies grew at a slightly faster pace in November because sales and new orders rose.

The Institute for Supply Management said Wednesday that its index of nonmanufacturing activity rose to 54.7 from 54.2 in October. Any reading above 50 indicates expansion. November’s figure is above the 12-month average of 54.4.

Other reports released Wednesday showed orders for business equipment such as machinery and communications gear rebounded more than previously estimated in October and worker productivity accelerated in the third quarter.

The nonmanufacturing activity report measures growth in a broad range of businesses from retail and construction companies to health-care and financial-services firms. The industries covered employ about 90 percent of the work force.

A measure of employment fell to the lowest level since July but still showed companies added workers last month.

One reason for the decline was that Hurricane Sandy forced many businesses to close in November, economists said.

And some companies may be postponing hiring because of worries over federal budget negotiations in Washington.

“For many businesses, hiring plans are on hold until the New Year,” Paul Edelstein, an economist at IHS Global Economics, said in a note to clients.

Other economists said the small increase in the services index points to underlying strength in the economy.

“The consumer is carrying a lot more of the economic momentum into the end of the year, given the cautiousness of business leaders,” said Joel Naroff, president of Naroff Economic Advisors Inc. in Holland, Pa. “That bodes well for next year.”

The report “supports our view that conditions should look a bit better in a few months’ time when all the distortions have unwound,” Paul Dales, an economist at Capital Economics, said.

Service companies have been a key source of job growth this year. They have created about 90 percent of the net jobs added since January. Still, many of the new service jobs have been low-paying retail and restaurant positions.

The November report suggests that Sandy may have actually helped some businesses. A company in the wholesale trade industry said its business benefited “tremendously” from shipping emergency supplies.

Most other economic reports have shown that the storm slowed activity last month.

Sandy tore through the Northeast on Oct. 29, shutting down businesses and cutting off power to 8 million homes in 10 states. The storm reduced consumer spending and incomes in October, the government said last week.

Factory orders edged up 0.8 percent in October, the Commerce Department said. The increase slowed from a 4.5 percent jump in September.

Orders for core capital goods, a category viewed as a good proxy for business investment plans, increased 2.9 percent in October, the biggest increase in eight months. That represented an upward revision from an initial estimate of 1.7 percent. The increase came after big declines in the investment category this summer.

Orders for durable goods rose 0.5 percent in October, up from a preliminary estimate of no gain, while orders for nondurable goods, items such as chemicals and paper, were up 1.1 percent.

The Labor Department said Wednesday that productivity grew at an annual rate of 2.9 percent from July through September. That’s the fastest pace in two years and higher than the initial estimate of 1.9 percent. Labor costs dropped at a rate of 1.9 percent, more than the 0.1 percent dip initially estimated.

Productivity was revised higher because economic growth was faster in the third quarter than first estimated, while hours worked were unchanged. Productivity is the amount of output per hour of work.

Information for this article was contributed by Christopher S. Rugaber and Martin Crutsinger of The Associated Press and by Alex Kowalski and Chris Middleton of Bloomberg News.

Business, Pages 25 on 12/06/2012