US service sector growth picks up in August

NEW YORK: The pace of expansion in the US services sector unexpectedly accelerated in August, snapping a three-month streak of slower growth, according to an industry report released on Tuesday.

The Institute for Supply Management said its services index rose to 53.3 last month from 52.7 in July. That topped the 51.0 median forecast in a Reuters poll of 71 economists.

A reading above 50 indicates expansion in the sector.

The report was at odds with service sector readings beyond US borders, which showed growth slowed sharply last month in the euro zone, Britain and China.

Other US data has been disappointing as well, including a report last week showing the economy did not add any new jobs in August, leaving the jobless rate above 9 percent.

The ISM report suggests consumers have not stopped spending entirely. The new orders component rose to 52.8 from 51.7 in July, a mildly encouraging sign of consumer demand.

The report "defied expectations," said Theodore Littleton of IFR Economics, a unit of Thomson Reuters. "The uptick may indicate that service industries did better later in the month, overcoming the early August misery seen in Friday's employment report."

The employment index in the ISM report, however, slipped to 51.6 in August, its lowest since September 2010. It stood at 52.5 in July.

Copyright Reuters, 2011