Orders lift U.S. service companies as sales improve

Services, the biggest chunk of the U.S. economy, picked up in April as gains in orders and sales signaled even faster growth ahead.

The Institute for Supply Managements nonmanufacturing index rose to 55.2, the highest level since August, from 53.1 in March, the report showed Monday. Readings above 50 indicate expansion.

Retailers, restaurants and construction companies were among the 14 industries reporting growth last month as the worlds biggest economy rebounds from a weak first quarter. Increased hiring sets the stage for stronger consumer spending that will benefit companies such as United Parcel Service Inc.

Its a solid report, consistent with what we saw in the April employment numbers and in manufacturing, said Joseph LaVorgna, chief U.S. economist at Deutsche Bank Securities in New York, who projected a reading of 55. The economy is emerging nicely from the winter doldrums.

Confidence is building, Anthony Nieves, chairman of the survey, said on a conference call with reporters. Employment has to increase in this sector if business keeps growing.

The ISM nonmanufacturing survey covers an array of industries including utilities, retailing and health care. It also encompasses construction and agriculture.

It paints a better picture of the economy, said Kathleen Bostjancic, an economist at Oxford Economics USA in New York. We have a decent pace of job growth. It boosts confidence and will support consumer spending.

The figures show the U.S. expansion is strengthening, while China cools and Europe struggles to pick up. Chinese manufacturing contracted for a fourth month in April, according to figures from HSBC Holdings Plc and Markit.

Demand is getting a boost as more Americans find work. Labor Department figures last week showed Americas job-creation machine kicked into higher gear in April. The 288,000 gain in payrolls exceeded the median forecast in a Bloomberg survey and followed a 203,000 advance in March. The unemployment rate fell to 6.3 percent, the lowest level since September 2008.

The economy has started the quarter with a lot of momentum, said Markus Schomer, chief economist at PineBridge Investments LLC in New York. We have moderate but accelerating growth, inflation is no longer falling, and the Federal Reserve is expected to keep rates very low for a very long time.

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Orders lift U.S. service companies as sales improve