U.S. Service Sector Growth Accelerates Much More Than Expected In November

(RTTNews) - Growth in U.S. service sector activity accelerated by much more than anticipated in the month of November, the Institute for Supply Management revealed in a report on Wednesday, with the index of activity in the sector rebounding after falling in the two previous months.

The ISM said its non-manufacturing index jumped to 59.3 in November from 57.1 in October, with a reading above 50 indicating growth in the service sector. Economists had expected the index to show a more modest uptick to a reading of 57.5.

Anthony Nieves, chair of the ISM Non-Manufacturing Business Survey Committee, said, "Comments from the majority of respondents indicate that business conditions are on track for continued growth."

"The respondents have also stated that there is some strain on capacity due to the month-over-month increase in activity," he added.

The increase by the headline index was partly due to notably faster business activity growth, as the business activity index jumped to 64.4 in November from 60.0 in October.

The new orders index also climbed to 61.4 in November from 59.1 in October, while the prices index rose to 54.4 from 52.1.

On the other hand, the report said the employment index fell to 56.7 in November from 59.6 in October, indicating a slower rate of job growth in the service sector.

Payroll processor ADP released a separate report earlier in the day showing that employment in the service-providing sector climbed by 176,000 jobs in November after jumping by 187,000 jobs in October.

On Monday, the ISM said activity in the U.S. manufacturing sector grew at a slightly slower rate in November, although the index of activity in the sector fell by much less than anticipated.

The ISM said its manufacturing index edged down to 58.7 in November from 59.0 in October, while economists had expected the index to drop to 57.8.

Paul Dales, Senior U.S. Economist at Capital Economics, said the two ISM surveys are consistent with GDP growth of 4.5 percent, which is much better than his forecast for 2.5 percent growth.

"It's possible that the ISM surveys are picking up an earlier boost to activity from the lower oil price than we have been expecting," Dales said.

He added, "But we think it is more likely that the ISM surveys have got a bit carried away and will fall back modestly in the coming months to levels consistent with GDP growth of around 3%."