Service Sector Surges In July

Highest Level In 5 Months

Service Sector Surges In JulyA key leading indicator, the Institute for Supply Management's (ISM) services index rose sharply in July to 56, up from 52.2 in June, beating the forecasts of analysts by several points. New orders in the services sector – which includes industries like health care and construction – increased to their highest level in five months, data showed.

Because a reading above 50 indicates expansion in the sector, some analysts believe the U.S. economy could be poised for growth in the second half of 2013. After three consecutive quarters of minimal GDP gains, economists are increasingly predicting the U.S. economy will expand by more than 2% in Q3 and Q4. In its latest statement, the U.S. Federal Reserve, which exerts great control over monetary policy, continues to forecast stronger economic growth into 2014.

Within the services sector, the retail and hospitality markets have produced the most consistent job gains in recent months. For July, the two markets combined to generate nearly 90,000 jobs –that's about half the total private sector positions created.

Among other ISM data released, the forward-looking new orders component also reached its highest level since February, increasing to 57.7. The employment index weakened, though, falling to 53.2 from 54.7 in June. Finally, the ISM exports index rose to 49.5 in July, a modest gain that signals demand from abroad remains tepid.