A pickup at service industries in September probably wasn’t strong enough to quicken the U.S. recovery, economists said before a report today.
The Institute for Supply Management’s non-manufacturing index, which covers about 90 percent of the economy, rose to 52 from 51.5 in August, according to the median forecast of 75 economists surveyed by Bloomberg News. The gauge, where readings greater than 50 signal growth, averaged 55.3 during the six-year expansion that ended in December 2007.
“The economy is still in a vulnerable state,” said Aaron Smith, a senior economist at Moody’s Analytics in West Chester, Pennsylvania. A lack of jobs and the drop in home prices mean consumer spending will be slow to recover, he said.
A jobless rate that is projected to average more than 9 percent through 2011 indicates household spending will not propel the economy as it has after past recessions. A halting recovery is one reason why some Federal Reserve policy makers say they are prepared to do more to stimulate growth.
The Tempe, Arizona-based purchasing managers’ group is scheduled to issue the report at 10 a.m. New York-time. Estimates ranged from 50 to 53.3.
The services survey covers industries that range from utilities and retailing to health care, housing, finance and transportation. The group’s factory survey, released Oct. 1, showed manufacturing expanded last month at the slowest pace since November as orders and production cooled.
Best Buy Co., the world’s largest consumer-electronics retailer, announced Sept. 28 it plans to offer a promotion on every Friday in October to spur sales of phones. The Richfield, Minnesota-based company also plans to keep holiday hiring even with last year, adding about 29,000 seasonal employees.
“We know it is a tough environment out there,” Best Buy Co. Chief Executive Officer Brian Dunn told reporters Sept. 28. “It will be hard fought.”
Charles “Wick” Moorman, chief executive officer of Norfolk Southern Corp., the second-largest U.S. railroad by market capitalization, is projecting the recovery from the worst recession since the 1930s, while muted, will continue.
“We saw a fairly sharp snap-back as 2009 went on and early in 2010 that seems now to have slowed,” Moorman said in a Sept. 29 interview on Bloomberg Television. We’re just going to continue to see a slow-growth economy for some time to come.”
Moorman said his company is adding workers mainly to replace those leaving the railroad, with “some slight hiring” to meet growing demand. The Norfolk, Virginia-based company’s payroll remains down about 2,000 from where it was when the recession began, he said.
The Labor Department later this week may report unemployment rose to 9.7 percent in September from 9.6 percent the prior month, according to the median estimate of economists surveyed. Companies added 75,000 workers to payrolls, according to the survey median, not enough to keep up with a growing labor force.
Economists surveyed last month projected the unemployment rate will average 9.6 percent this year and 9.2 percent in 2011, after averaging 9.3 percent in 2009. That would be the longest span of joblessness above 9 percent since 1941.
The labor market is also a reason why Fed policy makers may respond with more stimulus. The outlook for job growth and inflation is “unacceptable,” and more monetary easing is probably needed to spur growth and avert deflation, Fed Bank of New York President William Dudley said in a speech Oct. 1.
Some retailers are more optimistic about the holiday shopping period. The International Council of Shopping Centers on Oct. 1 projected sales for November and December will climb 3 percent to 3.5 percent, the best performance since 2006. The New York-based trade group tracks sales at stores open at least a year at more than 30 chains.
Investors may be equally upbeat as retailing shares outperformed the broader market last month. The Standard & Poor’s Supercomposite Retailing Index gained 15 percent in September compared with an 8.8 percent increase in the S&P 500.
Bloomberg Survey ========================================= ISM Non- Manu Index ========================================= Date of Release 10/05 Observation Period Sept. ----------------------------------------- Median 52.0 Average 51.9 High Forecast 53.3 Low Forecast 50.0 Number of Participants 75 Previous 51.5 ----------------------------------------- 4CAST Ltd. 52.5 ABN Amro Inc. 52.0 Action Economics 52.0 Aletti Gestielle SGR 52.5 Ameriprise Financial Inc 52.0 Banesto 52.2 Bank of Tokyo- Mitsubishi 52.2 Bantleon Bank AG 52.5 Barclays Capital 53.0 Bayerische Landesbank 51.5 BBVA 52.0 BMO Capital Markets 52.0 BofA Merrill Lynch Resear 51.5 Briefing.com 51.0 Capital Economics 51.0 Citi 51.0 Commerzbank AG 52.0 Credit Agricole CIB 52.0 Credit Suisse 51.0 Daiwa Securities America 52.0 Danske Bank 51.9 Desjardins Group 51.5 Deutsche Bank Securities 51.0 Deutsche Postbank AG 51.8 Exane 52.5 First Trust Advisors 53.0 FTN Financial 52.0 Goldman, Sachs & Co. 52.0 Helaba 50.5 High Frequency Economics 50.0 HSBC Markets 53.0 Hugh Johnson Advisors 53.0 IDEAglobal 53.0 IHS Global Insight 53.3 Informa Global Markets 52.5 ING Financial Markets 52.0 Insight Economics 50.0 Intesa-SanPaulo 52.5 J.P. Morgan Chase 51.5 Janney Montgomery Scott L 50.7 Jefferies & Co. 52.0 Landesbank Berlin 52.5 Landesbank BW 52.0 Maria Fiorini Ramirez Inc 52.5 MF Global 52.5 MFC Global Investment Man 50.5 Mizuho Securities 51.0 Moody’s Analytics 51.5 National Bank Financial 51.5 Natixis 51.3 Newedge 52.2 Nomura Securities Intl. 51.8 Nord/LB 52.0 Pierpont Securities LLC 52.0 PineBridge Investments 52.5 PNC Bank 52.5 Prestige Economics 52.0 Raymond James 52.0 RBC Capital Markets 51.0 RBS Securities Inc. 52.0 Scotia Capital 50.5 Societe Generale 52.0 Standard Chartered 52.0 State Street Global Marke 52.1 Stone & McCarthy Research 52.6 TD Securities 51.0 Thomson Reuters/IFR 52.4 UBS 53.0 UniCredit Research 51.8 University of Maryland 52.0 Wells Fargo & Co. 52.5 WestLB AG 51.0 Westpac Banking Co. 51.0 Woodley Park Research 51.7 Wrightson ICAP 52.5 =========================================