US services firms grow at fastest pace since October 2015

WASHINGTON – U.S. services companies expanded last month at their fastest pace in more than a year, an encouraging sign for the economy.

The Institute for Supply Management, a trade organization of purchasing managers, said Monday that its services index reached 57.2 in November, up from 54.8 in October and the highest level since it hit 58.3 in October 2015. Anything above 50 signals growth.

The services industry has now grown for 82 straight months. Fourteen services industries reported growth last month; only two contracted. The ISM says services companies reported that production, hiring and new export orders all grew faster than they did in October.

The continued gain in the ISM’s index points to possible economic gains ahead because services companies represent a significant chunk of the U.S. economy, accounting for over 70 per cent of nonfarm U.S. jobs.

Ian Shepherdson, chief economist at Pantheon Macroeconomics, said the survey’s measure of employment suggests that the economy could start generating 250,000 jobs a month in the first quarter of 2017.

On Friday, the government reported that employers added 178,000 jobs in November — close to the monthly average of 180,000 added jobs so far this year.

The U.S. economy grew at a 3.2 per cent annual pace from July through September, the fastest rate in two years, the government has estimated. Growth is expected to slow to an annual rate of around 2 per cent in the current October-December quarter.