BLBG: Growth In U.S. Service Industries Was Little Changed In May
Service industries in the U.S. expanded in May at about the same pace as the prior month, a sign the U.S. is failing to gain momentum as employment slows and the European crisis intensifies.
The Institute for Supply Management’s index of non- manufacturing businesses, which covers about 90 percent of the economy, rose to 53.7 last month from April’s 53.5, the Tempe, Arizona-based group said today. The median forecast of 75 economists surveyed by Bloomberg News projected 53.4. Readings above 50 signal expansion.
Budget cuts aimed at reducing sovereign debt and putting countries like Greece and Spain on a more sustainable fiscal path are bringing Europe to the brink of a recession that is rippling through the global economy. The lack of strength in service industries and cooling manufacturing, which was a pillar of the recovery, mean there’s little to spur U.S. growth.
“This pace of growth is nothing to write home about,” said Michael Carey, chief economist for North America at Credit Agricole CIB in New York, who correctly forecast the gain in the services index. “The problem is we are not growing fast enough to absorb the large numbers of unemployed people out there. Businesses are making a conscious decision to be very cautious.”
Economists’ estimates in the Bloomberg survey ranged from 52 to 55.1. The ISM services survey covers industries ranging from utilities and retailing to housing, health care and finance.
Shares Climb
Stocks rose amid the cheapest valuation in six months for the Standard & Poor’s 500 Index. The gauge climbed 0.3 percent to 1,282.32 at 10:36 a.m. in New York.
Today’s report follows June 1 data that showed factories tempered production and pared inventories in May as the global economy weakened. The ISM manufacturing index fell to 53.5 from a 10-month high in April. At the same time, the orders gauge climbed to 60.1 last month, the highest since April 2011.
The ISM non-manufacturing survey’s measure of new orders increased to 55.5 from 53.5 in the prior month, while the employment gauge dropped to a five-month low of 50.8 from 54.2. A gauge of business activity rose to 55.6 from 54.6. The index of prices paid decreased to 49.8, the lowest since July 2009, from 53.6.
A cooling labor market may help explain why demand is yet to accelerate. Payrolls climbed by 69,000 in May, less than the most-pessimistic forecast in a Bloomberg survey, after a revised 77,000 gain in April that was smaller than initially estimated, figures showed June 1. The jobless rate rose to 8.2 percent from 8.1 percent.
Jobs and Incomes
Faster hiring and wage growth is needed to ensure sustained growth in consumer purchases, which increased 0.3 percent in April after a 0.2 percent rise the prior month.
“The overall economy is still our customers’ main concern,” Bill Simon, the U.S. chief executive officer of Wal- Mart Stores Inc. said during a May 17 earnings call. “In particular, they remain concerned about job security or the availability of jobs, followed by gas and energy prices and rising food costs.”
Car purchases eased in May, company data showed June 1. General Motors Co. (GM) and Toyota Motor Corp. led five of the six largest automakers in reporting U.S. sales gains in May that trailed estimates as incentive offers failed to draw enough buyers amid slumping employment growth.
Cheaper Gasoline
Falling fuel costs represent a positive influence on consumers. The average cost of a gallon of regular gasoline at the pump dropped to $3.59 on June 3, a three-month low.
That is helping shore up purchases in less expensive items. Retailers’ same-store sales topped analysts’ estimates in May as warm weather combined with the lower gasoline prices to draw shoppers. Sales at Minneapolis-based Target Corp., the second- largest U.S. discount retailer, climbed 4.4 percent. Framingham, Massachusetts-based TJX Cos., the owner of T.J. Maxx and Marshalls, posted an 8 percent increase, reports showed last week.
To contact the reporter on this story: Shobhana Chandra in Washington at schandra1@bloomberg.net
To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net
