Service industries in the U.S. expanded in January at about the same pace as the previous month, showing that the biggest part of the economy is holding up in the face of federal government budget battles.
The Institute for Supply Management’s nonmanufacturing index cooled to 55.2 last month from a 10-month high of 55.7 in December, the Tempe, Ariz.-based group said Tuesday. Economists projected that the gauge would ease to 55, according to the Bloomberg survey median. Readings above 50 signal expansion.
Sustained consumer spending and a rebound in housing will probably keep benefiting companies such as MasterCard Inc. and PulteGroup Inc., helping propel service industries that account for almost 90 percent of the economy.
“There’s not really any evidence that we’re seeing a slowing,” said Mike Englund, chief economist at Action Economics LLC in Boulder, Colo.
Estimates in the Bloomberg survey of 76 economists ranged from 53 to 57.5. The index, which includes industries ranging from utilities and retail to health care, housing and finance, has averaged 53.5 since the recession ended in June 2009.
Eight nonmanufacturing industries, including construction, finance and real estate, reported growth in January, while nine said business contracted.
The Institute for Supply Management’s employment gauge jumped to 57.5, the highest since February 2006, from 55.3 in the previous month, Tuesday’s report showed. The measure of new orders decreased to 54.4, the lowest since April 2012, from 58.3. The gauge of businessactivity dropped to 56.4 from 60.8.
U.S. service industries are poised to benefit from manufacturing that’s starting to emerge from a slump in the second half of 2012. The Institute for Supply Management’s factory gauge advanced to a nine-month high of 53.1 in January, the group reported last week.
A stronger housing market is also underpinning the economy. Spending on all construction projects rose 0.9 percent in December to an $885 billion annual rate, the fastest since August 2009, Commerce Department figures showed on Feb. 1. Homebuilding outlays increased 2.2 percent to the highest level since November 2008.
U.S. home prices jumped by the most in 6 1/2 years in December, spurred by a low supply of available homes and rising demand.
Home prices rose 8.3 percent in December compared with a year earlier, according to a report Tuesday from CoreLogic, a real estate data provider. That is the biggest annual gain since May 2006. Prices rose last year in 46 of 50 states.
Home prices also increased 0.4 percent in December from the previous month. That’s a healthy increase given that sales usually slow over the winter months.
Steady increases in prices are helping fuel the housing recovery. They’re encouraging some people to sell homes and enticing would-be buyers to purchase homes before prices rise further.
Higher prices can also make homeowners feel wealthier. That can encourage more consumer spending.
The gains have generated more optimism among companies such as Bloomfield Hills, Mich .-based Pulte-Group, the largest homebuilder by market value.
“The combination of incredibly low mortgage rates, continued increases in rental rates and especially rising home prices, and very low - and likely to stay low - inventory levels for housing lead us to believe that 2013 will be a better year for U.S. housing than 2012,” Chief Executive Officer Richard Dugas said on a Thursday earnings call.
Realtors are also benefiting. Figures from the National Association of Realtors show 4.65 million previously owned homes were sold in 2012, up 9.2 percent from the previous year and the biggest increase since 2004.
Information for this article was contributed by Michelle Jamrisko, Shobhana Chandra and Chris Middleton of Bloomberg News, and Christopher S. Rugaber of The Associated Press.
Business, Pages 19 on 02/06/2013