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    US service industry growth surges in January

    By DANIEL WAGNER | Associated Press – Fri, Feb 3, 2012

    WASHINGTON (AP) — U.S. service companies grew at the fastest pace in 11 months in January as companies started hiring to keep up with rising demand.

    The Institute for Supply Management said Friday that its index of non-manufacturing activity jumped to 56.8 percent in January from 53 percent in December. The survey's employment index soared to its highest level since February 2006. Any reading above 50 indicates expansion.

    The trade group of purchasing managers surveys businesses including restaurants, hotels, retailers, financial services firms and construction companies. The service sector employs 9 out of 10 U.S. workers.

    The service sector has been growing for two straight years. But hiring had stagnated, with the employment index falling below 50 in two of the past four months. Companies overcame their reluctance to hire in January, pushing the employment index up to 57.4 percent from 49.8 percent.

    The report echoed the government's strong January employment report, also released Friday. Service companies added 83,000 jobs last month, according to the Labor Department.

    Nearly every component of the ISM index suggested that business for non-manufacturing companies is picking up. Companies said business activity, new orders, exports and imports all picked up. Inventories shrank more quickly, indicating solid sales, and deliveries from suppliers slowed down.

    Economists say the service sector received a boost from strong new orders the previous month. In January, new orders grew for the fourth straight month, at the fastest pace since last March.

    The report "provides further evidence that the U.S. economy is strengthening," said Paul Dales, senior U.S. economist at Capital Economics, in a note to clients. But he warned that the economic momentum might fade quickly, as it did after strong starts to 2010 and 2011.

    "As the unwinding of the previous fiscal stimulus starts to bite and as global demand falters, something similar may be on the cards this year," he said.

    The economy grew in the final three months of 2011 at a 2.8 percent annual rate. That was faster than the 1.8 percent pace in the July-September quarter.

    Much of the growth came from companies restocking their inventories, a process that was expected to help manufacturers and have a more modest impact on the service industry. That's one reason the ISM's January survey far outpaced economists' expectations.

    Economists had expected the overall index to edge up 0.2 percentage points, rather than the 3.8 percentage point leap that the ISM reported, according to a FactSet survey.

    Manufacturing grew in January at the fastest pace in seven months, the ISM said on Wednesday. New orders to factories grew, and builders spent more on construction for a fifth straight month.

    Service-sector growth had edged up in December after staying flat for three straight months.

     

    3 comments

    • dr know
      dr know  •  3 mths ago
      service industry, healthcare, high-tech manufacturing will continue to grow
      • Dicky
        Dicky 3 mths ago
        Excellent band!
      • dr know
        dr know 3 mths ago
        i'm a 90's Grunge fan myself
    • BPatMan
      BPatMan  •  3 mths ago
      In other words, more people are flipping burgers than ever before. Obama said he was going to fundamentally transform America and he has kept his word.
    • Dicky
      Dicky  •  3 mths ago
      Made in America: A Blueprint for Creating Jobs
      By DAVID MUIR and BEN FORER

      In Bozeman, Mont., Anders Lewendal is hard at work building a home he hopes will be a blueprint for creating jobs in America.
      Lewendal, an economist turned builder, is constructing a house made entirely from U.S.-made products. Everything from the nails, screws and bolts, to the steel, staples and bathtub is made in the United States.
      "Every piece here is made in America," he said.
      Lewendal is convinced that if every builder bought just 5 percent more U.S.-made materials, they would create 220,000 jobs. The Boston Consulting Group agrees, confirming that Lewendal's numbers add up.
      In all, the U.S.-made house is being built with more than 120 products from more than 33 states. But builders do acknowledge that using American products can be more expensive.
      A box of nails is $5 more than those made in China and steel is $146 more a bundle. Even though certain goods are more expensive, in total, the cost of the house is nearly identical, given that other U.S.-made products are cheaper. The all-American home, which is not yet finished, is running only 1 to 2 percent more than a foreign-sourced house.
      While some items might be more expensive, the difference in quality is often noticeable. The nails produced by Maze Nails of Peru, Ill., are made using high-carbon steel and a double coat of zinc. The result is that they are stronger, rust proof and jam the nail gun less.
      "[We're] one of the last makers of nails in this country," company president Roelif Loveland said.
      About 90 percent of nails come from China and, Loveland said, if he could double sales, he could add 25 more jobs.
      Many other U.S. companies said the same thing. If Lewendal's idea catches on, they could hire, too. From Gorilla Tape of Cincinnati to a Sherwin-Williams plant in Georgia and a Moen plant in Pennsylvania, companies around the country say if builders bought more American products, it would put people back to work.
      ABC News sent Lewendal's list to builders across the country and some responsed immediately.
      Contractor Tarek Saad said he started ordering Maze Nails, an architect in Miami said she'll start buying the U.S.-made items that are priced the same as the foreign ones, and Paul Minnis, a remodeler from Michigan, doubled Lewendal's request.
      "If 5 percent will make a difference," he wrote, "I am going to try for 10 percent or more American-made products."
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