U.S. Service Sector Strengthened in August -- Update

By Josh Mitchell Features Dow Jones Newswires

The U.S. service sector gained momentum last month, as sales climbed and companies boosted hiring.

Continue Reading Below

The Institute for Supply Management said Wednesday its index of nonmanufacturing activity rose to 55.3 in August from 53.9 in July. A reading above 50 indicates growing activity, as measured by factors such as sales, hiring and production.

Economists surveyed by The Wall Street Journal had expected a reading of 55.3.

The report adds evidence the economy is growing healthily in the second half of the year, with companies and consumers boosting spending amid steady global growth and a booming stock market. Service industries represent the bulk of the economy, ranging from barbers to accountants.

"August's release shows the economy is continuing to grow at an above-trend pace," Capital Economics economist Michael Pearce said in a note to clients. The report suggests a nearly 3% economic growth rate in the third quarter, matching the second quarter's pace and above the trend in recent years.

An index of new orders at non-manufacturers -- measuring sales -- climbed 2 percentage points last month to 57.1. Industries reporting higher demand include retail, real estate and education.

Continue Reading Below

An index of hiring climbed to 56.2, the highest since May.

Companies also reported higher prices for materials and services, suggesting that inflation pressures -- which have been modest this year across the U.S.--are growing. The index of prices reached 57.9 in August, and has risen more than 8 percentage points since May.

Write to Josh Mitchell at joshua.mitchell@wsj.com

(END) Dow Jones Newswires

September 06, 2017 11:18 ET (15:18 GMT)