Service Industries in U.S. Probably Little Changed in September

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Photographer: JB Reed/Bloomberg News

An employee prepares to load packages onto a delivery truck at the FedEx Harlem River Yards sorting facility in New York.

Service industries in the U.S. probably expanded in September at about the same pace as in the prior month, indicating the biggest part of the economy is making scant progress, economists said before a report today.

The Institute for Supply Management’s non-manufacturing index, which covers almost 90 percent of the economy, fell to 53.4 last month from 53.7 in August, according to the median forecast of 77 economists in a Bloomberg survey. Readings higher than 50 signal growth. Another report may show employers added fewer workers.

Service providers such as FedEx Corp. (FDX) are cutting growth forecasts as the global economy weakens and American companies curb investments in new equipment. At the same time, a recovery in housing is benefiting builders like Lennar Corp. (LEN) and helping sustain the U.S. expansion.

“The services industries in the U.S. are in kind of a steady state,” said Guy LeBas, chief fixed-income strategist at Janney Montgomery Scott LLC in Philadelphia.

The Tempe, Arizona-based ISM’s index, which covers industries ranging from utilities and retailing to health care, housing and finance, is due at 10 a.m. Bloomberg survey estimates ranged from 51.5 to 54.7.

The group’s manufacturing index, released Oct. 1, unexpectedly expanded in September after three months of contraction, the longest such stretch since the recession ended in June 2009.

Homebuilding may be among the best performers. New housing construction climbed in August, boosted by the strongest pace of single-family starts in more than two years, Commerce Department figures showed last month.

Borrowing Costs

Mortgage rates at all-time lows and cheaper properties are driving sales for companies like Lennar. The third-largest builder by revenue said on Sept. 24 that its quarterly profit more than quadrupled from a year earlier.

“The homebuilding business is beginning to revert to normal and that’s positive for the U.S. economy in general, which is in turn good for a sustained recovery in the housing market,” Stuart Miller, chief executive officer at Lennar, said on a conference call. “Overall demand has been improving and we’ve seen a consistent sales pace at improving prices.”

Investors have taken notice. The Standard & Poor’s Supercomposite Homebuilder Index has climbed 74 percent this year, outpacing a 15 percent gain for the broader S&P 500 Index.

Delivery Service

For FedEx, operator of the world’s largest cargo airline, weaker global growth is taking a toll. On Sept. 18 the economic bellwether, because it ships goods from financial documents to electronics, pared its forecast for 2012 U.S. growth to 1.9 percent from a June projection of 2.4 percent. The global expansion will cool to 2.3 percent this year, followed by a 2.7 percent gain in 2013, the Memphis-based company said.

Unemployment stuck above 8 percent for more than three years and limited job growth are also a drag for the services industry. Figures at 8:15 a.m. today from the ADP Employer Services may show private employers hired 140,000 workers in September after 201,000 the prior month, according to the median estimate in a Bloomberg survey.

                     Bloomberg Survey

============================================
                               ADP ISM Non-
                           Payroll     Manu
                            ,000’s    Index
============================================

Date of Release              10/03    10/03
Observation Period           Sept.    Sept.
-------------------------------------------
Median                         140     53.4
Average                        140     53.3
High Forecast                  190     54.7
Low Forecast                    90     51.5
Number of Participants          38       77
Previous                       201     53.7
-------------------------------------------
4CAST                          150     53.0
ABN Amro                       130     53.5
Action Economics               140     53.5
Ameriprise Financial           125     53.0
Banca Aletti                  ---      53.2
Bank of the West               130     53.4
Bank of Tokyo-Mitsubishi      ---      54.0
Banorte-IXE                   ---      53.0
Bantleon Bank AG              ---      53.5
Barclays                      ---      53.0
Bayerische Landesbank          125     53.6
BBVA                           100     52.7
BMO Capital Markets            120     53.5
BNP Paribas                    150     52.0
BofA Merrill Lynch             150     54.0
Briefing.com                   100     52.0
Capital Economics             ---      53.0
CIBC World Markets            ---      52.9
Citi                          ---      52.0
ClearView Economics           ---      53.2
Comerica                      ---      53.0
Commerzbank AG                 150     54.0
Credit Agricole CIB           ---      53.5
Credit Suisse                 ---      53.0
Daiwa Securities America      ---      53.0
Danske Bank                   ---      53.5
DekaBank                      ---      53.0
Desjardins Group              ---      53.0
Deutsche Bank Securities       135     54.0
Deutsche Postbank AG          ---      54.5
DZ Bank                        145     53.1
Exane                         ---      53.2
First Trust Advisors          ---      54.1
FTN Financial                 ---      53.0
Goldman, Sachs & Co.          ---      54.0
Helaba                        ---      53.5
High Frequency Economics       140     54.2
HSBC Markets                   155     53.5
Hugh Johnson Advisors          133     52.8
IDEAglobal                     150     54.0
IHS Global Insight            ---      54.3
Informa Global Markets         150     51.5
ING Financial Markets          150     53.6
Insight Economics              140     53.0
Intesa Sanpaulo               ---      53.5
ITG Investment Research       ---      51.5
J.P. Morgan Chase             ---      53.5
Janney Montgomery Scott        135     53.2
Jefferies & Co.               ---      53.0
John Hancock Financial         178     ---
Landesbank Berlin             ---      53.5
Landesbank BW                   90     54.0
Lloyds Bank                    150     53.4
Maria Fiorini Ramirez         ---      53.5
Moody’s Analytics              175     53.4
National Bank Financial       ---      53.5
Natixis                        160     53.0
Nomura Securities              165     52.6
Nord/LB                       ---      54.0
OSK Group/DMG                 ---      53.3
Pierpont Securities           ---      52.5
PineBridge Investments        ---      53.0
PNC Bank                      ---      53.2
Prestige Economics            ---      53.9
Raiffeisenbank International   160     ---
Raymond James                  130     53.2
RBC Capital Markets           ---      52.5
RBS Securities                ---      53.0
Renaissance Macro Research     135     53.0
Scotiabank                     110     53.5
Societe Generale               125     54.7
Standard Chartered             170     54.0
Stone & McCarthy              ---      53.5
TD Securities                  150     53.0
UBS                           ---      53.7
University of Maryland         135     53.5
Wells Fargo & Co.             ---      53.7
Westpac Banking Co.             90     52.0
Wrightson ICAP                 190     54.0
============================================

To contact the reporter on this story: Michelle Jamrisko in Washington at mjamrisko@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net

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