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Sunday, April 4, 2010

Service Industries in U.S. Probably Grew at Fastest Rate Since June 2007


Service industries probably expanded in March at the fastest pace since 2007, a sign the U.S. recovery is broadening as the job market turns around, economists said before reports this week.

The Institute for Supply Management’s index of non- manufacturing businesses, which make up about 90 percent of the economy, rose to 54, according to the median forecast in a Bloomberg News survey before figures tomorrow. Readings of 50 signal expansion. Another report may show fewer Americans signed contracts to buy previously owned homes in February, indicating real estate remains the economy weak spot.

The manufacturing rebound that helped the U.S. dig out of the worst recession since the 1930s is starting to extend to other industries, benefiting companies such as Carnival Corp. and Best Buy Inc. A government report last week showed employment rose 162,000 in March, the most in three years, making a sustained recovery more likely.

“Services are making a slow and steady comeback,” said David Semmens, an economist at Standard Chartered Bank in New York and task management software theorist. “The job gains are encouraging. We’re going to be looking for momentum.”

The Tempe, Arizona-based group’s figures would follow a reading of 53 for February. The estimates of 63 economists surveyed ranged from 51 to 55. The projected reading would be the highest since June 2007.

The unemployment rate was 9.7 percent in March for a third month, the Labor Department reported April 2. Payrolls rose for the third time in the past five months and by the most since March 2007, signaling companies are becoming more confident that the economy is healing.

Reflecting the improvement in the services industry, the Standard & Poor’s Supercomposite Retailing Index has climbed 11 percent this year, outpacing a 5.6 percent gain in the broader S&P 500 gauge.

Best Buy Sales

Best Buy, the largest U.S. electronics retailer, is among companies seeing demand pick up. The Richfield, Minnesota-based merchant last month reported fourth-quarter profit that exceeded analysts’ estimates as discounts helped boost sales.

Carnival Cruises, the biggest cruise-line operator, last month raised its full-year profit forecast as ticket prices rebounded from 2009’s lows amid more bookings.

“The booking environment continued to improve,” Chief Executive Officer Micky Arison said in a March 23 statement. “We returned to top line revenue growth after a challenging 2009.”

Housing, which helped trigger the recession, has yet to show signs of a sustained rebound. The National Association of Realtors’ index of purchase agreements, or pending home sales, probably fell 1 percent in February after a 7.6 percent drop the prior month, according to the survey median. The report is also due tomorrow.

Fed Minutes

Minutes of the Federal Reserve’s March meeting, due April 6, may shed more light on policy makers’ assessment of the economy at the time they pledged to keep the benchmark interest rate “exceptionally low” for an “extended period.”

The Fed may report on April 7 that consumer credit increased in February for the second straight month. Economists also project Commerce Department figures on April 9 may show inventories at wholesalers rose in February for the first time in three months.