Tuesday, 05 May, 2015
(Bloomberg) — Service industries such as real-estate firms and restaurants unexpectedly grew at a faster pace in April as the biggest part of the U.S. economy picked up after a weak start to the year. The Institute for Supply Management’s non-manufacturing index rose to 57.8, the highest since November, from 56.5 in March, the Tempe, Arizona-based group’s report showed Tuesday. It surpassed all estimates in a Bloomberg survey of 78 economists. Readings above 50 signal expansion. Strengthening consumer spending after a frigid winter on the back of gains in employment and still-low gasoline prices will propel services, which account for almost 90 percent of the economy as tracked by ISM. The advance means the U.S. can overcome a slowdown in manufacturing caused by the jump in the dollar and slump in oil prices that are hurting exports and business investment. “We will see a stronger second half,” Joseph LaVorgna, chief U.S. economist at Deutsche Bank Securities Inc. in New York, said before the report. “The consumer can come back pretty strongly, as the labor market is improving, home prices are still rising and the stock market is rising.” The median forecast of economists surveyed by Bloomberg called for 56.2. Estimates ranged from 54 to 57.5. The group’s non-manufacturing survey covers an array of industries including utilities, retailing, and health care, and also factors in construction and agriculture. Employment Firms The ISM services report showed the employment gauge rose to 56.7, the strongest since October, compared with 56.6 in March. The new orders measure climbed to a three-month high of 59.2 from 57.8. The index of prices paid declined to 50.1 from 52.4. The business activity index increased to 61.6 from the prior month’s 57.5. The measure parallels the ISM’s factory production gauge. In contrast, the group’s factory survey released last week showed more weakness. The ISM manufacturing index held at an almost two-year low of 51.5 in April. Still, its more forward-looking indicator on bookings reached a four-month high, while the measure of factory employment fell to 48.3, the weakest since September 2009. The advance in the dollar since mid-2014 and the global drop in oil prices have taken a toll on business investment and exports, causing the world’s largest economy to almost stall in early 2015. Temporary restraints including harsh winter weather and delays at West Coast ports also played a role. Trade Deficit The U.S. trade deficit widened in March to the highest level in more than six years, fueled by a record surge in imports as commercial activity resumed at the ports, a report from the Commerce Department showed Tuesday. The gap increased 43.1 percent, the biggest jump in 18 years, to $51.4 billion, the largest since October 2008. The shortfall exceeded the highest estimate of 70 economists surveyed by Bloomberg. Purchases of foreign-produced foods, capital goods and consumer products all set records, while demand for petroleum dropped. Gross domestic product, the volume of all goods and services produced, rose in the first quarter at a 0.2 percent annualized rate, the weakest in a year, after advancing 2.2 percent in the prior three months, according to Commerce Department data released April 29. Consumer spending, which accounts for about 70 percent of the economy, grew 1.9 percent. Sustained hiring and faster wage gains would help encourage Americans to purchase more goods and services. Lower fuel bills also are lifting confidence and boosting purchasing power. Auto Sales Carmakers and auto dealerships are benefiting as low fuel prices continue to drive demand for pickups and sport utility vehicles. General Motors Co.’s sales in April exceeded analysts’ projections though Ford Motor Co. and Nissan Motor Co. reported gains that were less than predicted. While recent economic data has been mixed, “some higher frequency indices point to improvement ahead,” Yong Yang, Ford’s senior economist, said on a May 1 sales call with analysts. “Overall, we believe that the underlying fundamentals supporting growth in 2015 remain in place.” Part of any improvement will probably be driven by housing and the industry makes gradual progress. Sales of previously owned homes climbed in March to the highest level since September 2013, according to figures from the National Association of Realtors. Purchases of new houses, tracked by the Commerce Department, slumped in March from a seven-year high. Disclaimer The information contained in this communication from the sender is confidential. It is intended solely for use by the recipient and others authorized to receive it. If you are not the recipient, you are hereby notified that any disclosure, copying, distribution or taking action in relation of the contents of this information is strictly prohibited and may be unlawful. This email has been scanned for viruses and malware, and may have been automatically archived by Mimecast Ltd, an innovator in Software as a Service (SaaS) for business. Providing a safer and more useful place for your human generated data. Specializing in; Security, archiving and compliance. To find out more visit the Mimecast website.