Activity in the U.S. service sector unexpectedly grew at a faster rate in the month of October, according to a report released by the Institute for Supply Management on Wednesday.
The ISM said its non-manufacturing index climbed to 59.1 in October from 56.9 in September, with a reading above 50 indicating growth in the service sector.
The increase by the non-manufacturing index came as a surprise to economists, who had expected the index to dip to 56.5.
“After the slight cooling off in September, the non-manufacturing sector reflected growth across most of the indexes,” said Anthony Nieves, chair of the ISM Non-Manufacturing Business Survey Committee. “Respondents remain mostly positive about business conditions and the overall economy.”
The unexpected increase by the headline index was partly due to a notable acceleration in new orders growth, as the new orders index jumped to 62.0 in October from 56.7 in September.
The business activity index also climbed to 63.0 in October from 60.2 in September, while the employment index edged up to 59.2 from 58.3.
The prices index also crept up to 49.1 in October from 48.4 in September, although the reading below 50 indicates a drop in prices for the second consecutive month.
James Knightley, an economist at ING Bank, said, “While the manufacturing sector remains under pressure from dollar strength and external demand weakness, the rest of the U.S. economy is looking in good shape.”
“If this is backed up by a respectable payrolls report (and hopefully a rise in average earnings) on Friday, it will look increasingly likely that the Federal Reserve will come down in favor of hiking in December,” he added.
Monday morning, the ISM released a separate report showing only a slight expansion in U.S. manufacturing activity in the month of October.
The ISM said its purchasing managers index edged down to 50.1 in October from 50.2 in September, while economists had expected the index to dip to 50.0.
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