Ahead of the Bell: Services index

AP News
Posted: Mar 03, 2011 7:10 AM
Ahead of the Bell: Services index

The nation's service sector, which employs about 90 percent of the U.S. work force, likely grew in February at the fastest pace in more than five years.

Economists forecast that the Institute for Supply Management's service sector index ticked up slightly to 59.5 from 59.4 in January. That would be the highest level since August 2005, when the index reached 61.4. Any reading over 50 indicates expansion of the sector. February's report is expected to be the 15th straight month of growth.

The index plummeted to 37.6 in November 2008, at the height of the financial crisis. The sector contracted for all but three months in 2009. The index then topped 50 for all of last year.

In the fall, services companies began growing faster, adding to expectations that the economy is picking up. The service index has increased for five straight months, rising 6.6 points since August.

Consumers likely fueled much of the gains. They boosted their spending at the end of last year by the most in five years, benefiting financial services companies, retailers, shipping companies and other service providers.

The trade group's report also includes measures of employment, orders, prices and other factors.

The employment index rose in January to its highest level since May 2006, raising hopes among many economists that hiring would ramp up. Those hopes were largely disappointed when the January employment report was released, showing that employers added only 36,000 jobs that month.

Many analysts expect a much better showing when February's jobs report is issued Friday. Economists are projecting a gain of 175,000 jobs, while the unemployment rate is forecast to tick up to 9.1 percent from 9 percent.