AP News

Ahead of the Bell: US Services Index


WASHINGTON (AP) — The Institute for Supply Management reports on growth at U.S. services firms in September. The ISM will release its services index at 10:00 a.m. EDT Thursday.

SMALL DECLINE: Economists forecast the index declined to 57.5 in September, according to a survey by FactSet. That would be down from an eight-year high of 58.6 in August. Any reading above 50 indicates growth. The ISM is a trade group of purchasing managers.

STILL HEALTHY: Even if the expected decline occurs, the September reading would still point to healthy growth at service companies. August's reading was the highest since December 2005, pushed up by higher sales and orders. A gauge of new orders reached the highest level in 2 ½ years, suggesting sales should remain healthy in the coming months.

And a measure of hiring rose in August to its highest level in six months.

OTHER DATA LESS UPBEAT: The survey covers businesses that employ 90 percent of the workforce, including retail, construction, health care and financial services.

The survey's jump in August was an encouraging sign that growth may be picking up. But other data have been mixed. Consumers boosted their spending in August only slightly. And while the ISM's index suggested services firms added jobs at a faster pace in August, the government's employment report showed that hiring by services firms slowed that month.

On Wednesday, private payroll provider ADP said that hiring by service firms dipped in September from the previous month. The ADP figures usually diverge from the government's more comprehensive employment report.

The government's September employment report was scheduled to be released on Friday. But it will now be delayed because of the government shutdown.

The shutdown may depress consumer confidence, particularly if it lasts for more than a week. That could cause Americans to cut back on their spending at service firms such as restaurants, retailers and hotels.

Many economists forecast that growth has slowed to an annual rate of 1.5 percent to 2 percent in the July-September quarter, down from a 2.5 percent annual rate in the April-June quarter.

Growth may rebound to an annual rate of 2.5 percent to 3 percent in the current October-December quarter. But that forecast were made before this week's impasse that shuttered the government. The shutdown could shave about 0.15 percentage points from the fourth quarter figure for each week it lasts.


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