Ahead of the Bell: ISM service sector index

AP News
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Posted: Dec 03, 2009 6:18 AM

A private measure of U.S. service sector activity likely rose for a third straight month in November as consumer spending picked up _ key ingredients for a broad recovery that eventually offers Americans new jobs.

The Institute for Supply Management's service index likely rose to 51.5, from 50.6 in October, according to analysts polled by Thomson Reuters.

Any reading above 50 signals growth in the service sector. That threshold was broken in September for the first time in 13 months. A reading of 51.5 would be the strongest since April 2008.

The ISM measure tracks more than 80 percent of the country's economic activity, including hospitals, retailers, financial services companies and truckers. The service sector is highly dependent on consumer spending, which powers about 70 percent of the economy.

The government said last month that consumer spending rose 0.7 percent in October, the biggest jump since August, when the Cash for Clunkers program fueled spending on cars. Meanwhile, Americans' incomes rose 0.2 percent, up for the second straight month.

More spending by U.S. consumers will translate into higher sales for the nation's service providers _ and eventually, should mean more jobs.

That hasn't happened yet, with the unemployment rate hitting a 26-year high of 10.2 percent in October. But there's some good news: an online-job board executive said in late November that job postings for financial services and information-technology sectors are rising, even though that's historically unusual at the end of the year.

The ISM is scheduled to release its report on the service sector Thursday at 10 a.m. EST. The index is based on a survey of the institute's members in 18 industries and covers indicators such as new orders, employment and inventories.

Investors should keep an eye on new orders, which augur future activity. That measure rose for the first time in a year in September and its growth accelerated in October.

ISM's service index has trended higher since bottoming at 37.4 in November, the lowest level since the Tempe, Ariz.-based trade group of purchasing executives began releasing comparable data in January 2008.