WASHINGTON, D.C. — U.S. service companies grew at a slightly weaker pace in October than September because sales and new orders slowed. But a measure of employment rose, indicating services firms hired more.
The Institute for Supply Management said Monday that its index of nonmanufacturing activity fell to 54.2. That’s down from a sixmonth high of 55.1 in September. Any reading above 50 indicates expansion.
“Things are modestly improving,” Michael Feroli, chief economist at JPMorgan Chase & Co. in New York, said before the report. “We’re not growing as fast as we’d like, but we’re still growing. The U.S. economy is expanding and continues to expand.”
The report measures growth in a broad range of businesses from retail andconstruction companies to health care and financial services firms. The industries covered employ about 90 percent of the work force.
A gauge of hiring rose to a seven-month high of 54.9. The government said Fri-day that services firms added 163,000 net jobs in October. It was the best showing since February and represented 95 percent of the jobs created last month.
October’s ISM reading matched the 12-month average for the index. Overall, 13 industries reported growth and five contracted. The industries reporting the fastest growth were agriculture, construction, management of companies, and finance and insurance; those showing the most contraction were mining and arts and entertainment.
A measure of current sales fell to 55.4 after jumping to 59.9 in September. New orders fell, partly because of a decline in export orders. That reflects Europe’s economic slowdown and weaker growth in larger developing countries such as Brazil.
Economists said the report still shows there is some momentum in the service sector. October’s reading is above the July-September average of 53.8.
“The tentative indication ... is that growth may well be improving,” Joshua Shapiro, chief economist at MFR Inc., said in a note to clients.
The ISM reported last week that manufacturing expanded for a second straight month in October. The sector had contracted from June through August.
Jonathan Basile, an economist at Credit Suisse, said the October readings of the manufacturing and non-manufacturing indexes are consistent with an annual growth rate of about 2.3 percent. That would be an improvement from the 2 percent pace in the July-September quarter.
Superstorm Sandy could drag on growth in the final three months of the year, economistsnoted. Still, most expect the effect to be temporary. Hiring and growth should pick up again early next year when homes and businesses damaged by the storm are rebuilt or repaired, they said.
The storm had no effect on Monday’s report, the ISM said, because the survey was completed before the storm made landfall.
Employers added 171,000 jobs in October and hiring was also stronger in August and September than first thought, the government said Friday. The unemployment rate rose to 7.9 percent from 7.8 percent in September. The increase mainly reflected the fact that many more people began looking for work last month and not all of them found jobs.
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 thenew service jobs have been lowpaying retail and restaurant positions.
Starbucks Corp., the world’s largest coffee-shop operator, reported record fourth-quarter revenue, while sales at stores open at least 13 months in the U.S., Canada and Latin America advanced 7 percent.
“If you look at the last few years, there is no question that the economic environment in the U.S. has been very challenging, fragile, and depending on the region, very difficult at times,” Starbucks’ Chief Executive Officer Howard Schultz said on a Nov. 1 earnings call. Still, “we’re confident that we can continue to navigate through changes in the economy and we’ve done it now year-over-year.” Information for this article was contributed by Christopher S. Rugaber of The Associated Press and Lorraine Woellert and Chris Middleton of Bloomberg News.
Business, Pages 19 on 11/06/2012