U.S. Service-Sector Index Rose to 60.1 in October-- 2nd Update

By Ben Leubsdorf Features Dow Jones Newswires

A broad gauge of U.S. economic activity ticked up in October to its highest level since August 2005.

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The Institute for Supply Management on Friday said its nonmanufacturing index rose to 60.1 in October from 59.8 in September. A reading above 50 indicates activity is expanding across service and other industries, while a number below 50 signals contraction.

Economists surveyed by The Wall Street Journal had expected an October reading of 58.0.

The overall U.S. economy has expanded at a healthy pace in recent months, bolstered by consumer and business spending.

Gross domestic product, a broad measure of goods and services produced across the U.S., expanded at a seasonally and inflation adjusted rate of 3.0% in the third quarter after notching a 3.1% growth rate in the second quarter, the Commerce Department said. That was the strongest six-month stretch of growth in three years.

A separate ISM index that tracks the manufacturing sector fell in October to 58.7, remaining in solid-expansion territory, the group said Wednesday. Its September reading of 60.8 was the strongest month since May 2004.

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Write to Ben Leubsdorf at ben.leubsdorf@wsj.com

The U.S. economy was humming in October, according to a broad gauge of business activity that hit a fresh 12-year high last month.

The Institute for Supply Management on Friday said its nonmanufacturing index rose to 60.1 in October from 59.8 in September. A reading above 50 indicates activity is expanding across service and other industries, while a number below 50 signals contraction.

Economists surveyed by The Wall Street Journal had instead expected a pullback from September's strong report. The index was introduced in 2008, and last month it was at its highest level since then; historical calculations showed the gauge was higher in August 2005.

It will be difficult to sustain the current robust pace of expansion in coming months, said Anthony Nieves, who oversees the ISM survey.

"Even with a strong holiday season, it will have to eventually level off or move sideways," he said. But even with a modest pullback, "it would still be reflecting a strong rate of growth," Mr. Nieves added.

The details of Friday's report were largely positive. The business activity and production index rose to 62.2. The new-orders index dipped to 62.8. The index tracking employment rose to 57.5.

The prices index was 62.7, down from September but still high. Inflation has been subdued this year, though a hurricanes-fueled spike in gasoline prices has pushed up broad price gauges in recent months.

Some 16 sectors reported growth during October, led by agriculture, while two sectors including educational services reported contraction.

The overall U.S. economy has expanded at a healthy pace in recent months, bolstered by consumer and business spending.

Gross domestic product, a broad measure of goods and services produced across the U.S., expanded at a seasonally and inflation adjusted rate of 3.0% in the third quarter after notching a 3.1% growth rate in the second quarter, the Commerce Department said. That was the strongest six-month stretch of growth in three years.

A separate ISM index that tracks the manufacturing sector fell in October to 58.7, remaining in solid-expansion territory, the group said Wednesday. Its September reading of 60.8 was the strongest month since May 2004.

"The continued strength of the business surveys illustrates that the pickup in GDP growth over the past couple of quarters has been no fluke, and supports our view that the economy will continue growing at a healthy pace over the coming quarters as well," said Andrew Hunter, U.S. economist at Capital Economics, in a note to clients.

Write to Ben Leubsdorf at ben.leubsdorf@wsj.com

(END) Dow Jones Newswires

November 03, 2017 11:22 ET (15:22 GMT)