Nation's service sector expanded in January

Friday, February 3rd 2006, 10:52 am
By: News On 6

NEW YORK (AP) _ The nation's service sector grew again in January, but the pace of growth slowed while extending an expansion that has stretched for nearly three years.

The Institute for Supply Management said Friday its index of nonmanufacturing activity fell to 56.8 from a revised reading of 61.0 in December. The new figure was lower than the 60 reading forecast by analysts.

A reading of 50 and above points to a growing service sector, while a figure below that signals contraction. January marked the 34th consecutive month of growth for the service sector, ISM said.

``The service sector of the economy is still doing well, but it's not sort of as broad an improvement as what it looked like earlier,'' said Gary R. Thayer, chief economist with A.G. Edwards & Sons Inc.

Also Friday, the government reported that employers added 193,000 new jobs to their payrolls last month and the unemployment rate dropped to 4.7 percent, the lowest since July 2001. The payroll results fell short of the 250,000 gain in jobs that had been forecast by analysts, but is still considered decent.

In a separate report, the government said orders to U.S. factories increased 1.1 percent in December, the third straight monthly rise. For all of 2005, factory orders rose 8.1 percent, following a 9.7 percent gain the previous year.

Economists and investors were also studying a report released Friday by the University of Michigan showing its consumer sentiment index slid 2.2 points to 91.2. Economists had predicted a slight decrease to 93.1.

Businesses surveyed by ISM were largely positive in assessing the economy, although some expressed continuing concerns about high energy prices and rising interest rates.

Of the 16 service industries tracked by ISM, eight reported increased activity, down from 11 in the previous month. They include insurance, business services, utilities, mining, transportation, health services and finance and banking.

``The overall indication in January is continued economic growth in the nonmanufacturing sector, but at slower rates of increase,'' said Ralph G. Kauffman, chairman of the group's survey committee.

New orders, employment and production all showed continued growth in the service sector, but at a slower rate, ISM said.

The new reading reflects a service sector that, while growing, has cooled somewhat, Thayer said. While that is no cause for concern, in coming months economists will be keeping an eye on new orders to service businesses to gauge the sector's direction, he said.

Overall, the combination of economic figures released Friday reflects an economy that started 2006 well, with the employment situation improving from the end of last year, Thayer said.