Tempe, AZ, May 5--The U.S. service sector grew at a brisk pace last month while employment and prices rose, according to a report released Wednesday by a private research group.
The Institute for Supply Management said its index of nonmanufacturing activity increased to 68.4 in April, the highest reading since the survey's inception in July 1997. The reading represents a significant jump from the 65.8 registered in March and indicates that economic growth in the service-sector is picking up momentum. Any readings above 50 indicate expanding activity, while those below point to contraction.
"The bottom line is that the economy is looking very strong and there are no signs of any letup," said Jim O'Sullivan, an economist in the Stamford, CT office of UBS AG. While the ISM figures don't correlate perfectly with national statistics on payroll expansion and economic output on a month-to-month basis, "they do suggest that growth and employment are still accelerating," he said.
The ISM's nonmanufacturing employment index rose to 54.5 in April from 53.9 in March, largely due to increased placement of permanent hires, new store openings and an increase in production volume. Prices paid by service organizations for purchased materials and services increased for the 25th consecutive month in April to 68.6 from 65.7 in March.
The survey, which covers services such as health care, banking and retailing, found that executives in 16 of the 17 industries covered reported a pickup in business activity. Growth was strongest in mining, entertainment, retail trade, transportation and finance and banking. One industry, legal services, grew at the same rate. In all, 46% of executives surveyed in April indicated that growth had picked up, compared with 42% in March. The ISM polls executives at 450 service companies each month.
