Services lift US growth hope

Tim Wallace
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STRONG service sector performance in the US has given new hope to economists who had feared signs of a slowdown.

The Institute for Supply Management’s non-manufacturing purchasing managers index (PMI) increased to 53.3 in August, up from 52.7 in July, it said yesterday.

Experts had expected the figure to fall to 51. Any figure above 50 represents growth, with this increase indicating a growing pace of expansion in the sector.

“These figures are far stronger than expected, helping to dispel some of the recent gloom,” said Chris Williamson, chief economist at Markit. “The consensus-beating reading leaves the US in better shape than other major developed economies.”

Analysts believe the figures keep the US on track for a solid economic growth figure in the third quarter, which could reach up to an annualised 1.5 per cent. However, weaker recent stats such as low jobs figures and poor manufacturing results mean the outlook is far from certain.

“There isn’t much good news around, so this is a spot of welcome relief,” said ING’s Rob Carnell. “Despite covering a larger section of the economy than the manufacturing survey, the service sector tends to trail rather than drive the business survey.

“That means this spot of welcome good news amongst an otherwise dismal backdrop probably doesn’t change the notion that the US is skirting recession right now.”

The surprise improvement in the US counters Eurozone stats earlier in the week, which showed a slowdown in growth to 51.1. Countries like Spain and Italy are experiencing declining output in services.