Bloomberg News

Services in U.S. Probably Expanded at a Slower Pace

May 03, 2012

Dagny Dingman, a co-owner of Schmendricks Bagels, explains the process of making good bagels in a kitchen in San Francisco. Photographer: David Paul Morris/Bloomberg

Dagny Dingman, a co-owner of Schmendricks Bagels, explains the process of making good bagels in a kitchen in San Francisco. Photographer: David Paul Morris/Bloomberg

Service industries in the U.S. probably grew at a slower pace in April, a sign the largest part of the economy may struggle to accelerate without faster job growth, economists said before a report today.

The Institute for Supply Management’s index of non- manufacturing industries cooled to a four-month low of 55.3 from 56 in March, according to the median projection of 74 economists surveyed by Bloomberg News. Readings greater than 50 signal expansion. Other figures may show first-time claims for jobless benefits declined last week.

Limited job and wage gains, combined with depressed property values, may make it difficult for Americans to step up their spending after purchases rose in the first quarter by the most in a year. Increased demand for services, which make up about 90 percent of the economy, would help broaden the almost three-year-old expansion.

“The service sector is still doing OK, but it may be improving a little bit more slowly than other periods in this expansion,” said George Mokrzan, senior economist at Huntington National Bank in Columbus, Ohio. “The economy is clearly out of the recovery stage and into the expansion phase, but that expansion is just grinding. Services will benefit the most from improving employment levels and a strengthening economy.”

The Tempe, Arizona-based group’s report is due at 10 a.m. Estimates in the Bloomberg survey ranged from 54 to 57. The gauge has averaged 53.4 since the recession ended in June 2009.

Expansion among service industries may be pausing after a surge in the first quarter that coincided with the strongest pace of job growth in six years.

Consumer Spending

Household purchases rose 2.9 percent from January through March, the most since the final three months of 2010, Commerce Department data showed on April 27. Gross domestic product rose at a 2.2 percent annual rate, after a 3 percent pace the prior quarter.

Further gains may depend on the pace of job creation and reducing an unemployment rate that’s been above 8 percent since February 2009. Payrolls increased by 635,000 from January through March, the biggest quarterly gain since the first three months of 2006, data from the Labor Department show.

Jobless claims last week declined to 379,000 from 388,000 in the prior period, according to the median projection in a Bloomberg survey before Labor Department’s 8:30 a.m. release today.

A Labor Department report tomorrow may show employees added about 160,000 new jobs in April after 120,000 a month earlier, according to the Bloomberg median forecast.

Winter Weather

The April data may benefit less from warmer weather. Unseasonably mild temperatures may have spurred Americans to dine out and go shopping last quarter, helping boost demand for services. The January-to-March period was the warmest first quarter on records going back to 1895, according to the National Oceanic and Atmospheric Administration.

“While slower than any of us would prefer, we are seeing steady, positive improvement in the broad U.S. economy,” Steve Joyce, president and chief executive officer of Choice Hotels International Inc. (CHH:US), said during an April 27 earnings call. “Unemployment remains stubbornly high and people are still cautious. However, we believe consumers will continue to increase their travel.”

The Standard & Poor’s Supercomposite Hotels Index has climbed 21 percent since the end of 2011. That compares with a 12 percent gain in the broader S&P 500 Index.

                        Bloomberg Survey

================================================================
                             Prod-    Labor  Initial ISM Non-
                          uctivity    Costs   Claims     Manu
                              QOQ%     QOQ%   ,000’s    Index
================================================================
Date of Release              05/03    05/03    05/03    05/03
Observation Period              1Q       1Q   28-Apr    April
----------------------------------------------------------------
Median                       -0.6%     2.7%      379     55.3
Average                      -0.6%     2.6%      377     55.4
High Forecast                 0.5%     3.7%      400     57.0
Low Forecast                 -1.5%     1.0%      360     54.0
Number of Participants          60       54       46       74
Previous                      0.9%     2.8%      388     56.0
----------------------------------------------------------------
4CAST                        -0.6%     2.6%      375     54.5
ABN Amro                      ---      ---       370     ---
Action Economics             -1.0%     2.5%      380     55.5
Aletti Gestielle              ---      ---      ---      56.0
Ameriprise Financial          0.2%     3.1%     ---      56.0
Banca Aletti                 -0.2%     ---      ---      56.3
Bank of Tokyo-Mitsubishi      ---      ---       370     ---
Bantleon Bank AG              ---      ---      ---      55.0
Barclays Capital             -1.5%     3.5%      385     55.5
Bayerische Landesbank         ---      ---      ---      55.5
BBVA                         -0.3%     2.8%      380     55.0
BMO Capital Markets          -1.0%     3.5%      378     55.0
BNP Paribas                  -1.0%     3.5%      380     55.0
BofA Merrill Lynch           -0.9%     2.9%      380     55.5
Briefing.com                 -0.5%     3.0%      375     56.5
Capital Economics            -0.5%     1.5%     ---      55.0
CIBC World Markets           -1.0%     ---      ---      ---
Citi                         -0.3%     2.2%      400     54.0
ClearView Economics          -0.3%     3.2%     ---      57.0
Commerzbank AG                ---      ---       385     55.0
Credit Agricole CIB          -1.0%     3.2%     ---      ---
Credit Suisse                -1.2%     1.5%      385     55.0
Daiwa Securities America     -1.0%     3.0%     ---      56.5
Danske Bank                   ---      ---      ---      55.0
DekaBank                     -0.5%     2.7%     ---      55.5
Desjardins Group             -0.6%     3.1%      375     54.8
Deutsche Bank Securities     -0.5%     3.7%     ---      54.0
Deutsche Postbank AG          ---      ---      ---      55.8
DZ Bank                      -0.2%     2.7%     ---      55.0
Exane                        -0.8%     1.0%     ---      55.0
Fact & Opinion Economics     -0.8%     3.0%      380     55.0
First Trust Advisors         -0.3%     1.1%      383     56.4
FTN Financial                 0.5%     2.0%     ---      55.0
Goldman, Sachs & Co.         -0.4%     ---      ---      55.0
Helaba                       -0.9%     3.0%      380     55.0
High Frequency Economics     -0.7%     2.5%      360     56.0
HSBC Markets                 -0.8%     1.4%      380     55.5
IDEAglobal                   -0.8%     2.5%      375     57.0
IHS Global Insight           -0.4%     1.9%      380     55.0
Informa Global Markets       -0.6%     2.6%      380     54.0
ING Financial Markets        -0.7%     2.9%     ---      55.0
Insight Economics            -1.5%     3.2%      375     56.5
Intesa Sanpaulo              -0.5%     ---      ---      55.6
J.P. Morgan Chase             ---      ---       380     54.5
Janney Montgomery Scott       0.1%     1.8%     ---      56.7
Jefferies & Co.              -0.5%     2.8%      375     55.5
Landesbank Berlin             ---      ---       380     55.5
Landesbank BW                -0.7%     2.5%     ---      55.5
Maria Fiorini Ramirez         ---      ---       375     55.0
Market Securities             ---      ---      ---      55.2
Mizuho Securities            -1.0%     3.0%      380     ---
Moody’s Analytics            -0.8%     2.4%      370     56.3
National Bank Financial      -0.4%     ---      ---      55.0
Natixis                      -0.2%     2.6%     ---      55.3
Nomura Securities            -1.4%     1.8%     ---      54.3
Nord/LB                      -0.5%     2.7%      380     55.0
OSK Group/DMG                 ---      ---      ---      55.6
O’Sullivan                   -0.5%     1.8%      375     55.0
Parthenon Group              -0.7%     1.2%      366     54.7
Pierpont Securities          -1.0%     2.0%      372     55.5
PineBridge Investments        0.4%     ---       375     57.0
PNC Bank                      0.0%     2.5%     ---      56.2
Prestige Economics            ---      ---      ---      55.5
Raymond James                -0.9%     2.5%      375     55.5
RBC Capital Markets           ---      ---       390     55.0
RBS Securities               -1.0%     3.5%      375     55.4
Scotia Capital                ---      ---       385     55.3
SMBC Nikko Securities         0.3%     2.7%     ---      54.0
Societe Generale             -1.2%     2.2%      365     56.4
Standard Chartered            ---      ---       375     55.0
Stone & McCarthy Research     ---      ---       368     56.2
TD Securities                -1.0%     3.0%      385     54.5
UBS                          -0.5%     2.0%      370     54.5
UniCredit Research            ---      ---      ---      55.5
University of Maryland       -0.3%     2.6%      380     55.0
Wells Fargo & Co.            -0.6%     2.5%     ---      56.0
WestLB AG                    -0.5%     2.7%     ---      55.5
Westpac Banking Co.          -1.0%     3.1%      380     54.0
Wrightson ICAP               -1.0%     3.5%      375     55.5
================================================================

To contact the reporter on this story: Alex Kowalski in Washington at akowalski13@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net


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Companies Mentioned

  • CHH
    (Choice Hotels International Inc)
    • $49.03 USD
    • 0.19
    • 0.39%
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