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US services index slips on sharp fall in orders

Published on NewsOK Modified: January 6, 2014 at 10:11 am •  Published: January 6, 2014
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Service companies have grown at a modest pace this year. It has averaged 54.7 over the past 12 months.

The survey typically tracks growth in consumer spending, which drives 70 percent of economic growth.

Spending by consumers was restrained for most of last year. But Americans have opened their wallets a bit more in recent months. That could push the index higher in 2014.

Retail sales posted healthy gains in November and December, according to government figures. The biggest increases were at auto dealers, furniture stores, and at electronics and appliance stores. Those outlets have benefited as Americans have purchased more homes and cars. Online shopping has also grown at a strong pace.

However, traditional retailers, such as department stores and clothing stores, haven't benefited as much. Many were disappointed by this season's holiday sales.

The dip in the services index comes after the ISM said Thursday that its manufacturing index remained near a 2 ½-year high in November. Measures of new orders and employment grew at a faster pace, pointing to higher output in the coming months.

The economy expanded at a 4.1 percent annual pace in the July-September quarter, buoyed by a big increase in companies' stockpiles. That was the fastest pace in nearly two years. Growth was likely slower in the October-December quarter because inventory building probably didn't boost growth by as much.

But economists are getting more optimistic about the fourth quarter. Many now expect growth will reach 2.5 percent to 3 percent at an annual rate, up from estimates of around 2 percent just a few weeks ago.