Services surge in November
America’s service industries expanded in November at the fastest clip since October of last year, putting the economy’s biggest sector on a robust growth path.
The Institute for Supply Management’s nonmanufacturing index jumped to 57.2, exceeding all forecasts in a Bloomberg survey, from 54.8 in October, the Tempe, Ariz.-based group’s data showed Monday. Readings above 50 signal growth. The median forecast called for 55.5.
Measures of business
activity and employment strengthened at companies that cover almost 90 percent of the economy, signaling growing optimism about demand. The group’s factory survey released last week also showed promise, with manufacturing expanding by the most in five months.
“This last quarter is having the year finish up pretty strong,” Anthony Nieves, chairman of the institute’s nonmanufacturing survey, said on a conference call with reporters. “I don’t project that December is going to be much different.”
Estimates in the Bloomberg survey of economists ranged from 54 to 57. The latest reading puts the institute’s services gauge above the 54.5 average for the first 10 months of this year and compares with 57.2 in all of 2015.
The services survey covers a range of industries, including retail, health care, agriculture and construction. Fourteen industries, including farming, retail, entertainment and transportation, expanded in November. The real estate, rental and leasing sector, along with public administration, contracted.
The group’s business activity index, which parallels the Institute for Supply Management’s factory production gauge, jumped to 61.7, also the highest since October 2015, from 57.7. A measure of services employment climbed to a 13-month high of 58.2 from 53.1.
Employment figures from the Labor Department last Friday showed payrolls increased by 178,000 workers in November and the nation’s unemployment rate dropped to a nineyear low of 4.6 percent. Business services, health care providers and restaurants accounted for most of the job gains.
The Institute for Supply Management’s new orders gauge eased to a still-robust 57 in November from 57.7 the previous month.
A second economic report released Monday from a group of business economists signaled that Americans should get used to a “new normal” of slow economic growth.
The median estimate from economists surveyed by the National Association for Business Economics calls for the U.S. economy to grow 2.2 percent in 2017, up from a forecast 1.6 percent this year and unchanged from the previous survey in September.
The improved number is still lackluster by historical standards. U.S. economic growth averaged 3.1 percent a year from 1948 to 2015, according to the Congressional Research Service. But the business economists say Americans need to get used to slow growth: 80 percent of those surveyed believe the potential growth rate of the American economy will remain at 2.5 percent or lower over the next five years.
The economy has been hobbled by an aging workforce and weak gains in productivity.
Still, the economists see the risk of a recession as remote; 90 percent expect the current economic expansion to continue until at least 2018.
They expect employers to add an average of 168,000 jobs a month in 2017, down from 180,000 a month so far this year.
Those surveyed also predict the unemployment rate will average 4.7 percent in 2017.
A healthy job market means wage growth is likely to outpace inflation this year and next, the economists say. They see consumer prices rising 2.3 percent next year, almost double the 1.2 percent increase they expect this year.