Service sector expands faster in August

By The Associated Press

WASHINGTON – The U.S. service sector expanded at a slightly faster pace in August, but growth was spotty and prices paid for raw materials shot up, according to a survey of senior executives.
The Institute for Supply Management on Tuesday said its service index rose to 53.3 percent in August from 52.7 percent in July. Economists surveyed by MarketWatch expected the index to fall to 51 percent.
While readings above 50 percent indicate more firms are expanding than contracting, the index is still well below its recent peak of 59.7 percent in February.
The U.S. service sector employs about four of every five workers and accounts for three-fourths of all economic activity. While the increase in activity in August was small, the ISM report is one of the few indicators in recent weeks to show some improvement in the U.S. economy.
The new-orders portion of the ISM service index rose 1.1 percentage points to 52.8 percent, bouncing off a two-year low. And the backlog of orders index climbed 3.5 percentage points to 47.5 percent, the first increase in five months.
Yet the prices index jumped 7.6 percentage points to 64.2 percent, reflecting the high costs that companies continue to pay for raw materials or service integral to their own businesses.
Also, the employment index dropped to 51.6 percent from 52.5 percent, suggesting that fewer companies have plans to hire.
Only 10 of the 18 service sectors tracked by ISM reported growth. That’s down from 13 in July and 15 in June.
Mining, information services and retail posted the biggest growth. Education, entertainment and recreation, and business services contracted the most.