Services in U.S. Probably Expanded at a Slower Pace
Service industries in the U.S. probably grew at a slower pace in April, a sign the largest part of the economy may struggle to accelerate without faster job growth, economists said before a report today.
The Institute for Supply Management’s index of non- manufacturing industries cooled to a four-month low of 55.3 from 56 in March, according to the median projection of 74 economists surveyed by Bloomberg News. Readings greater than 50 signal expansion. Other figures may show first-time claims for jobless benefits declined last week.
Limited job and wage gains, combined with depressed property values, may make it difficult for Americans to step up their spending after purchases rose in the first quarter by the most in a year. Increased demand for services, which make up about 90 percent of the economy, would help broaden the almost three-year-old expansion.
“The service sector is still doing OK, but it may be improving a little bit more slowly than other periods in this expansion,” said George Mokrzan, senior economist at Huntington National Bank in Columbus, Ohio. “The economy is clearly out of the recovery stage and into the expansion phase, but that expansion is just grinding. Services will benefit the most from improving employment levels and a strengthening economy.”
The Tempe, Arizona-based group’s report is due at 10 a.m. Estimates in the Bloomberg survey ranged from 54 to 57. The gauge has averaged 53.4 since the recession ended in June 2009.
Expansion among service industries may be pausing after a surge in the first quarter that coincided with the strongest pace of job growth in six years.
Consumer Spending
Household purchases rose 2.9 percent from January through March, the most since the final three months of 2010, Commerce Department data showed on April 27. Gross domestic product rose at a 2.2 percent annual rate, after a 3 percent pace the prior quarter.
Further gains may depend on the pace of job creation and reducing an unemployment rate that’s been above 8 percent since February 2009. Payrolls increased by 635,000 from January through March, the biggest quarterly gain since the first three months of 2006, data from the Labor Department show.
Jobless claims last week declined to 379,000 from 388,000 in the prior period, according to the median projection in a Bloomberg survey before Labor Department’s 8:30 a.m. release today.
A Labor Department report tomorrow may show employees added about 160,000 new jobs in April after 120,000 a month earlier, according to the Bloomberg median forecast.
Winter Weather
The April data may benefit less from warmer weather. Unseasonably mild temperatures may have spurred Americans to dine out and go shopping last quarter, helping boost demand for services. The January-to-March period was the warmest first quarter on records going back to 1895, according to the National Oceanic and Atmospheric Administration.
“While slower than any of us would prefer, we are seeing steady, positive improvement in the broad U.S. economy,” Steve Joyce, president and chief executive officer of Choice Hotels International Inc. (CHH), said during an April 27 earnings call. “Unemployment remains stubbornly high and people are still cautious. However, we believe consumers will continue to increase their travel.”
The Standard & Poor’s Supercomposite Hotels Index has climbed 21 percent since the end of 2011. That compares with a 12 percent gain in the broader S&P 500 Index.
Bloomberg Survey
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Prod- Labor Initial ISM Non-
uctivity Costs Claims Manu
QOQ% QOQ% ,000’s Index
================================================================
Date of Release 05/03 05/03 05/03 05/03
Observation Period 1Q 1Q 28-Apr April
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Median -0.6% 2.7% 379 55.3
Average -0.6% 2.6% 377 55.4
High Forecast 0.5% 3.7% 400 57.0
Low Forecast -1.5% 1.0% 360 54.0
Number of Participants 60 54 46 74
Previous 0.9% 2.8% 388 56.0
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4CAST -0.6% 2.6% 375 54.5
ABN Amro --- --- 370 ---
Action Economics -1.0% 2.5% 380 55.5
Aletti Gestielle --- --- --- 56.0
Ameriprise Financial 0.2% 3.1% --- 56.0
Banca Aletti -0.2% --- --- 56.3
Bank of Tokyo-Mitsubishi --- --- 370 ---
Bantleon Bank AG --- --- --- 55.0
Barclays Capital -1.5% 3.5% 385 55.5
Bayerische Landesbank --- --- --- 55.5
BBVA -0.3% 2.8% 380 55.0
BMO Capital Markets -1.0% 3.5% 378 55.0
BNP Paribas -1.0% 3.5% 380 55.0
BofA Merrill Lynch -0.9% 2.9% 380 55.5
Briefing.com -0.5% 3.0% 375 56.5
Capital Economics -0.5% 1.5% --- 55.0
CIBC World Markets -1.0% --- --- ---
Citi -0.3% 2.2% 400 54.0
ClearView Economics -0.3% 3.2% --- 57.0
Commerzbank AG --- --- 385 55.0
Credit Agricole CIB -1.0% 3.2% --- ---
Credit Suisse -1.2% 1.5% 385 55.0
Daiwa Securities America -1.0% 3.0% --- 56.5
Danske Bank --- --- --- 55.0
DekaBank -0.5% 2.7% --- 55.5
Desjardins Group -0.6% 3.1% 375 54.8
Deutsche Bank Securities -0.5% 3.7% --- 54.0
Deutsche Postbank AG --- --- --- 55.8
DZ Bank -0.2% 2.7% --- 55.0
Exane -0.8% 1.0% --- 55.0
Fact & Opinion Economics -0.8% 3.0% 380 55.0
First Trust Advisors -0.3% 1.1% 383 56.4
FTN Financial 0.5% 2.0% --- 55.0
Goldman, Sachs & Co. -0.4% --- --- 55.0
Helaba -0.9% 3.0% 380 55.0
High Frequency Economics -0.7% 2.5% 360 56.0
HSBC Markets -0.8% 1.4% 380 55.5
IDEAglobal -0.8% 2.5% 375 57.0
IHS Global Insight -0.4% 1.9% 380 55.0
Informa Global Markets -0.6% 2.6% 380 54.0
ING Financial Markets -0.7% 2.9% --- 55.0
Insight Economics -1.5% 3.2% 375 56.5
Intesa Sanpaulo -0.5% --- --- 55.6
J.P. Morgan Chase --- --- 380 54.5
Janney Montgomery Scott 0.1% 1.8% --- 56.7
Jefferies & Co. -0.5% 2.8% 375 55.5
Landesbank Berlin --- --- 380 55.5
Landesbank BW -0.7% 2.5% --- 55.5
Maria Fiorini Ramirez --- --- 375 55.0
Market Securities --- --- --- 55.2
Mizuho Securities -1.0% 3.0% 380 ---
Moody’s Analytics -0.8% 2.4% 370 56.3
National Bank Financial -0.4% --- --- 55.0
Natixis -0.2% 2.6% --- 55.3
Nomura Securities -1.4% 1.8% --- 54.3
Nord/LB -0.5% 2.7% 380 55.0
OSK Group/DMG --- --- --- 55.6
O’Sullivan -0.5% 1.8% 375 55.0
Parthenon Group -0.7% 1.2% 366 54.7
Pierpont Securities -1.0% 2.0% 372 55.5
PineBridge Investments 0.4% --- 375 57.0
PNC Bank 0.0% 2.5% --- 56.2
Prestige Economics --- --- --- 55.5
Raymond James -0.9% 2.5% 375 55.5
RBC Capital Markets --- --- 390 55.0
RBS Securities -1.0% 3.5% 375 55.4
Scotia Capital --- --- 385 55.3
SMBC Nikko Securities 0.3% 2.7% --- 54.0
Societe Generale -1.2% 2.2% 365 56.4
Standard Chartered --- --- 375 55.0
Stone & McCarthy Research --- --- 368 56.2
TD Securities -1.0% 3.0% 385 54.5
UBS -0.5% 2.0% 370 54.5
UniCredit Research --- --- --- 55.5
University of Maryland -0.3% 2.6% 380 55.0
Wells Fargo & Co. -0.6% 2.5% --- 56.0
WestLB AG -0.5% 2.7% --- 55.5
Westpac Banking Co. -1.0% 3.1% 380 54.0
Wrightson ICAP -1.0% 3.5% 375 55.5
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To contact the reporter on this story: Alex Kowalski in Washington at akowalski13@bloomberg.net
To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net
Services in U.S. Probably Expanded at a Slower Pace in April
David Paul Morris/Bloomberg
Dagny Dingman, a co-owner of Schmendricks Bagels, explains the process of making good bagels in a kitchen in San Francisco.
Dagny Dingman, a co-owner of Schmendricks Bagels, explains the process of making good bagels in a kitchen in San Francisco. Photographer: David Paul Morris/Bloomberg
May 2 (Bloomberg) -- U.S. Representative James Himes, a Connecticut Democrat, talks about the ADP payroll report for April and the economy. Employment increased by 119,000 following a revised 201,000 gain the prior month, according to figures from Roseland, New Jersey-based ADP Employer Services. Himes, speaking with Betty Liu on Bloomberg Television's "In the Loop," also discusses financial market regulations and the Occupy Wall Street protests. (Source: Bloomberg)
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