Service Industries in U.S. Probably Expanded at Slower Pace
Service industries grew in July at the slowest pace in five months as a lack of jobs hemmed in U.S. consumers, economists said before reports today.
The Institute for Supply Management’s non-manufacturing index, which covers about 90 percent of the economy, fell to 53 from 53.8 in June, according to the median forecast of 76 economists surveyed by Bloomberg News. Readings above 50 signal expansion. Another report may show companies took on less staff than in prior months.
Retailers like OfficeMax Inc. are predicting sales will suffer as an unemployment rate that is projected to hover near 10 percent forces companies to discount merchandise. Combined with an easing in manufacturing, the slowdown means the recovery from the worst recession since the 1930s will probably cool in the second half of the year.
“Things are moderating somewhat,” said Jay Feldman, an economist at Credit Suisse in New York. “It’s a very slow recovery by prior standards.”
The Tempe, Arizona-based ISM’s report is due at 10 a.m. in New York. Survey estimates ranged from 51.5 to 54.7.
A report from ADP Employer Services at 8:15 a.m. may show private payrolls rose by 30,000 in July after increasing by 13,000 in June and by an average 61,000 in the prior two months, according to the survey median.
Employment Forecast
The Labor Department in two days may report private payrolls grew by 90,000 last month while total employment fell by 60,000, reflecting the dismissal of temporary government workers as the decennial census wound down, according to the median estimate of economists surveyed. Unemployment rose to 9.6 percent from 9.5 percent, the survey showed.
OfficeMax, the third-largest U.S. office-supply chain, yesterday forecast sales will decline this quarter.
Chief Financial Officer Bruce Besanko said sales of back- to-school materials will be “extremely tough” as families limit spending. “Customers will be budget-conscious and retailers will be competitive and promotional” Besanko said in a telephone interview yesterday.
The Standard & Poor’s Supercomposite Retailing Index has fallen 18 percent since a 19-month peak on April 26, compared with an 8 percent decline in the broader S&P 500 gauge from its 19-month peak on April 23.
Federal Reserve Chairman Ben S. Bernanke this week gave an upbeat assessment on the outlook for consumers, projecting spending would climb as wages rose.
Bernanke’s View
While the U.S. has “a considerable way to go” for a full recovery, “the economy seems to have stabilized and is expanding again,” Bernanke said in a speech in Charleston, South Carolina.
The ISM services survey covers industries that range from utilities and retailing to health care, housing and finance. The group’s factory survey earlier this week showed manufacturing grew last month at the slowest pace of the year.
Data from the Commerce Department yesterday showed consumer spending and personal income were unchanged in June, further evidence the weak jobs recovery is hurting spending. Household purchases grew at a 1.6 percent rate in the second quarter, while the economy expanded at a less-than-forecast 2.4 percent pace, the government reported last week.
The outlook for jobs is one reason consumer confidence sank more than forecast in July, according to a Conference Board report last week.
Bloomberg Survey
=============================================
ADP ISM Non-
Payroll Manu
,000’s Index
=============================================
Date of Release 08/04 08/04
Observation Period July July
---------------------------------------------
Median 30 53.0
Average 33 53.1
High Forecast 85 54.7
Low Forecast -15 51.5
Number of Participants 37 76
Previous 13 53.8
---------------------------------------------
4CAST Ltd. -15 52.0
Action Economics 40 54.0
Aletti Gestielle SGR --- 53.0
Ameriprise Financial Inc 20 53.0
Banesto 30 53.0
Bank of Tokyo- Mitsubishi --- 52.4
Bantleon Bank AG --- 53.5
Barclays Capital --- 53.5
Bayerische Landesbank --- 53.0
BBVA 28 54.0
BMO Capital Markets 70 53.5
BNP Paribas 85 53.0
BofA Merrill Lynch Resear 40 54.0
Briefing.com 25 52.0
Capital Economics --- 52.0
CIBC World Markets --- 53.5
Citi --- 52.0
ClearView Economics --- 53.0
Commerzbank AG 50 53.0
Credit Suisse --- 53.0
Daiwa Securities America --- 53.0
DekaBank --- 52.5
Desjardins Group --- 53.5
Deutsche Bank Securities --- 53.5
Deutsche Postbank AG --- 53.2
DZ Bank 55 53.0
Exane --- 54.0
First Trust Advisors --- 53.5
FTN Financial --- 53.0
Goldman, Sachs & Co. --- 53.0
Helaba --- 53.0
High Frequency Economics 0 52.0
HSBC Markets 60 52.5
Hugh Johnson Advisors --- 54.0
IDEAglobal 40 53.0
IHS Global Insight --- 54.2
Informa Global Markets 30 53.0
ING Financial Markets 40 53.4
Insight Economics 50 53.0
Intesa-SanPaulo 35 52.0
J.P. Morgan Chase --- 53.5
Janney Montgomery Scott L --- 51.5
Jefferies & Co. 50 54.7
Landesbank Berlin --- 52.5
Landesbank BW 50 53.1
Maria Fiorini Ramirez Inc --- 54.0
MF Global --- 53.0
MFC Global Investment Man 15 53.0
Mizuho Securities 10 53.0
Moody’s Economy.com 40 54.3
National Bank Financial --- 54.0
Natixis 30 53.0
Nomura Securities Intl. 20 54.0
Pierpont Securities LLC --- 53.4
PineBridge Investments --- 52.0
PNC Bank --- 53.2
Raymond James --- 52.7
RBC Capital Markets --- 53.0
RBS Securities Inc. --- 53.8
Ried, Thunberg & Co. 15 53.5
Scotia Capital --- 53.0
Societe Generale --- 52.8
Standard Chartered 25 52.5
State Street Global Marke 56 53.4
Stone & McCarthy Research --- 53.0
TD Securities 20 53.0
Thomson Reuters/IFR 60 53.3
Tullett Prebon 40 53.5
UBS --- 53.5
UniCredit Research --- 53.5
Union Investment 15 ---
University of Maryland 35 53.0
Wells Fargo & Co. --- 53.1
WestLB AG 25 53.5
Westpac Banking Co. 20 53.0
Woodley Park Research 13 52.7
Wrightson Associates 15 53.5
=============================================
To contact the reporter on this story: Bob Willis in Washington at bwillis@bloomberg.net
OfficeMax Chief Financial Officer Bruce Besanko
Ramin Talaie/Bloomberg
Chief Financial Officer Bruce Besanko said sales of back-to-school materials will be “extremely tough” as families limit spending.
Chief Financial Officer Bruce Besanko said sales of back-to-school materials will be “extremely tough” as families limit spending. Photographer: Ramin Talaie/Bloomberg
Aug 3. (Bloomberg) -- Robert Doll, vice chairman and chief equity strategist at BlackRock Inc., talks about the outlook for U.S. stocks and global economic growth . Doll speaks with Margaret Brennan on Bloomberg Television's "InBusiness." (This is an excerpt of the full interview. Source: Bloomberg)
A Wal-mart employee stocks shelves at a Wal-mart Supercenter California. Photographer: Sandy Huffaker/Bloomberg
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