WASHINGTON – A private survey says growth accelerated in April at U.S. services companies, a potential positive for the economy after a sluggish start to 2016.
The Institute for Supply Management said Wednesday that its services index climbed to 55.7 in April, the highest level this year. The increase follows a reading of 54.5 in March. Any level above 50 signals growth.
New orders and employment measures all advanced last month, showing a stronger pace of expansion. The rate of business activity slipped in April, although that measure also pointed to continued gains.
The services index suggests that the economy might be improving slightly after an anemic opening to 2016. The U.S. economy expanded at an annual rate of just 0.5 per cent during the first three months of the year, the government reported last week.
“The increase in the ISM non-manufacturing index in April suggests that growth in the much larger service sector continues to strengthen,” said Andrew Hunter, an assistant economist at Capital Economics, who said recent indicators point to the economy growing at a decent but unspectacular 2 per cent this year.
In the first quarter, the pace of consumer spending slipped compared with the end of 2015, while business investment fell and the trade deficit subtracted from growth.
But steady job gains have prevented fears about the economy succumbing to the same level of financial turmoil that has recently gripped China, Japan, Brazil and parts of Europe. Employers have added 2.8 million jobs during the past 12 months, the hiring helping to provide a modest boost to household incomes that should support economic growth.
The employment report to be released Friday released by the government is expected to show job growth of 200,000 in April with the unemployment rate staying at 5 per cent, according to a survey of economists.
Still, payroll processor ADP said Wednesday that businesses added just 156,000 jobs in April, a slowdown from recent months.
There are signs that manufacturing has become less of a drag on growth, after factory activity contracted due to falling oil prices and a stronger dollar making American-made goods so expensive that exports were hurt.
ISM said in a separate report this week that manufacturing expanded in April, the second straight monthly improvement. The manufacturing index registered at 50.8 in April and 51.8 in March, after activity had been declining in the prior five months.
The Commerce Department seconded these gains, reporting Wednesday that factory orders rose 1.1 per cent in March.