US services growing speedily despite manufacturing slump

Ben Southwood
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ECONOMIC activity in the non-manufacturing sector grew for the 35th consecutive month in November, according to data yesterday from the Institute for Supply Management (ISM).

The ISM’s overall index for non-manufacturing activity grew 0.5 to hit 54.7 in November, substantially above the 50 level that indicates no change. Even more encouraging were the sub-indices for business activity, at 61.2, and for new orders, at 58.1, which suggest the cheer could carry into the future, and that the decline in manufacturing may not be fatal to the US recovery.

However, some anecdotal evidence implied that Hurricane Sandy had driven a portion of the improvement – at least for some of the firms in the survey.

This came as ADP released figures on underlying job growth, which judged it to be at roughly 150,000 in November, depressed 32,000 by Sandy to the 118,000 reported in the headline number. One of the collaborators on the report, Moody’s’ analytics’ Mark Zandi, said that there would have been over 200,000 jobs created in the month without the storm.

And productivity growth only added to the optimistic picture, bounding ahead at 2.9 per cent per year into the third quarter, according to revised data from the Department of Labor, up from the 2.7 per cent originally estimated and the fastest pace of increase for two years.

Meanwhile, unit labour costs fell at their fastest pace in close to a year, 1.9 per cent, also according to a revised figure. Previously the fall had been estimated at 0.1 per cent.