Expanding services show limit to weather impact on U.S economy

Service industries expanded more than forecast in January as the biggest part of the U.S. economy overcame the effects of snow and freezing temperatures to boost hiring by the most in more than three years. More

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ECONOMY

Expanding services show limit to weather impact on U.S economy

BLOOMBERG FILE PHOTO/MATTHEW STAVER
SURPRISING STRENGTH in the service industry in January helped buoy the markets and gave a shot of confidence that the U.S. economy was maintaining forward momentum.
Posted 2/5/14

WASHINGTON - Service industries expanded more than forecast in January as the biggest part of the U.S. economy overcame the effects of snow and freezing temperatures to boost hiring by the most in more than three years.

The Institute for Supply Management’s non-manufacturing index increased to 54 from 53 in December, the Tempe, Ariz.-based group said Wednesday. Readings greater than 50 signal expansion. The group’s employment gauge was the strongest since November 2010, even as a separate report showed company payrolls grew less than projected.

The pickup in services contrasts with the group’s manufacturing report this week that indicated factories expanded at a slower pace as colder-than-usual weather slowed demand and production. Retailers, management companies and professional services such as accountants were among areas that improved last month, showing the recovery is on firmer footing going into 2014 as households reduce debt burdens and wealth improves.

“This suggests ongoing momentum,” said Samuel Coffin, an economist at UBS Securities LLC in Stamford, Conn., and the top forecaster for the ISM services index in data compiled by Bloomberg going back two years. The divergence with the manufacturing figures shows there “is not a fundamental softening in activity.”

Companies added 175,000 workers to payrolls last month after a revised 227,000 rise in December, according to data issued today from the ADP Research Institute in Roseland, N.J. The median projection of 40 economists surveyed by Bloomberg called for an advance of 185,000.

Shares drop

Stocks fell after the reports. The Standard & Poor’s 500 Index dropped 0.2 percent to 1,752.43 at 12:03 p.m. in New York.

Weather was an issue in other parts of the world. Services in the United Kingdom grew in January at the slowest pace in seven months as new business cooled and wet weather soaked the country, another report today showed. Services in the euro area expanded at a slower pace than initially estimated and retail sales slid, according to other figures, underlining the fragility of the region’s recovery.

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