(Bloomberg) — Service industries in the U.S. sustained a faster pace of expansion in October than in the first half of the year, indicating the world’s largest economy is overcoming a global slowdown.
While the Institute for Supply Management’s non- manufacturing index decreased to 57.1 from the prior month’s 58.6, readings greater than 50 signal growth and last month’s outcome exceeded the 54.4 average for the first six months of 2014. The median estimate in a Bloomberg survey of 79 economists was 58.
“It’s still growth, and it’s coming off of a recent high,” Jay Morelock, an economist at FTN Financial in New York, said before the report. “High 50s is strongly expansionary and we think the service sector is looking fine.”
Another report today showing persistent progress in the labor market, along with lower prices at the gas pump, will probably help shoppers boost purchases entering the holiday-shopping season. Household spending, which accounts for almost 70 percent of the economy, has been held back as worker pay barely keeps pace with inflation.
Private payrolls climbed 230,000 in October, the most since June, after a revised 225,000 gain a month earlier, Roseland, New Jersey-based ADP Research Institute said today. Employment at services advanced by 181,000 last month, the group said.
“The job market is steadily picking up pace,” Mark Zandi, chief economist at Moody’s Analytics Inc., said in a statement. Moody’s produces the figures with ADP. “The job market will soon be tight enough to support a meaningful acceleration in wage growth.”
Service companies in the U.S. are faring better than some of their global counterparts. In the U.K., growth in services expanded in October at the slowest pace in 17 months, according to figures from Markit Economics in London.
Estimates in the Bloomberg survey for the U.S. ISM gauge ranged from 56 to 59.5. The non-manufacturing index averaged 55.9 this year through September, compared with 54.7 in all of 2013.
The ISM services survey covers an array of industries including utilities, retailing, health care and finance that make up almost 90 percent of the economy. It also factors in construction and agriculture.
The new orders gauge decreased to 59.1 in October from 61 the prior month. The measure of services employment climbed to a nine-year high of 59.6 from 58.5 in September. Business Activity
The business activity index, which parallels the ISM’s factory production gauge, fell to 60 from 62.9 in the previous period, while a measure of prices paid decreased to 52.1, a two- year low, from 55.2 as fuel costs declined.
Earlier this week figures showed the ISM manufacturing index climbed in October to 59 in October, matching August as the highest since March 2011. A measure of production was the strongest in a decade.
Improving sentiment, job growth and lower gasoline prices will probably help underpin domestic demand even as companies grapple with slowing global markets.
The cost of a gallon of regular gasoline averaged $2.96 yesterday, the lowest since December 2010, according to motoring group AAA.
Job gains that are poised for the best performance since 1999 are also helping brighten household sentiment. Employers added 248,000 workers in September, while the unemployment fell to 5.9 percent, the lowest since July 2008. The Conference Board’s gauge of consumer confidence rose last month to the highest level since October 2007.
MGM Resorts International, the largest owner of casinos on the Las Vegas Strip, is optimistic such trends will boost business.
Improving sentiment is “very important for us here in Las Vegas,” Chief Executive Officer James Joseph Murren said on an Oct. 30 earnings call. “People in general are feeling better with not only job security, the low interest rate environment, declining gas prices and we’re seeing that reflected in visitation and convention business.”
Bigger wage gains would help provide an even bigger push for consumer spending that slowed at the end of the third quarter. Average hourly earnings were 2 percent higher in September than a year earlier, barely more than the increase in inflation, according to Labor Department data.
–With assistance from Kristy Scheuble in Washington.