US service companies likely expanded at slower pace in August

Economic IndicatorsAssociated Press

The Institute for Supply Management reports on growth at U.S. service firms in August. The ISM will release its services index at 10 a.m. Eastern time Thursday.

SLOWER GROWTH: Economists forecast that the index dipped to 57.5 in August from 58.7 in July, according to a survey by FactSet. Any figure above 50 indicates expansion.

Continue Reading Below

The ISM is a trade group of purchasing managers. Its services survey covers businesses that employ 90 percent of the American workforce, including retail, construction, health care and financial services firms.

SUMMERTIME SURGE: In July, services businesses expanded at the fastest pace since December 2005. Sixteen of 17 industries tracked by the survey reported growth in July. Only utilities slowed. The healthy reading suggested that Americans are increasingly confident and willing to spend. They traveled more in the summer, boosting tourism businesses. They hired construction firms to do more remodeling work and renovations.

Still, services firms added just 140,000 jobs in July, fewest since January, according to the Labor Department.

SIGNS OF IMPROVEMENT: The economy has been gaining strength after a getting off to a slow start this year because of a bitter winter. The Commerce Department reported last week that the economy expanded at brisk 4.2 percent annual pace from April through June, raising expectations that the second half of the year will be healthier than the first.

The ISM reported Tuesday that U.S. manufacturing grew in August at the fastest pace in more than three years as factories produced more goods and new orders rose. And the Commerce Department reported Wednesday that business orders for U.S. factory goods rose by a record amount, largely because of a surge in demand for commercial aircraft.

On Friday, the Labor Department will report on hiring and unemployment in August. Economists forecast that the economy generated 220,000 jobs last month. That would be the seventh straight month that job gains exceeded 200,000, the longest such streak since 1997.