WASHINGTON – U.S. services companies grew last month at the fastest pace in nearly a year, potential good news for the U.S. economy.
The Institute for Supply Management said Wednesday that its services index jumped to 57.1 in September, the highest point since October, from August’s 51.4, the lowest since 2010. It was the biggest monthly gain since the index was introduced in 2008. Any reading above 50 signals growth.
New orders, production and export orders all grew faster last month, and hiring by services companies was the strongest since October.
“August’s drop was a fluke,” Ian Shepherdson, chief economist at Pantheon Macroeconomics, wrote in a research note. He noted that the August reading might have been warped by flooding in Louisiana and Mississippi.
The ISM is a trade group of purchasing managers. Its services survey covers businesses that employ the vast majority of workers, including retail, health care and financial companies.
Services firms have now grown for 80 straight months and have been a source of strength in an economy that has registered lacklustre growth since late last year.
Overall, the American economy has been struggling since late last year, growing at an annual pace of just 1.4 per cent from April through June after eking out annualized gains of 0.8 per cent the first three months of 2016 and 0.9 per cent in the fourth quarter of 2015. Business investment has dropped three straight quarters, pulled down by cutbacks in the energy industry.
The job market has been stronger: Employers have added an average of 204,000 jobs a month for the past year, and the unemployment rate is a low 4.9 per cent. The solid labour market is supporting healthy consumer spending, which expanded at a 4.3 per cent annual rate from April through June, the fastest pace since the end of 2014.