Service sector activity hits 10-year high in July

August 06 01:45 2015

The service sector expanded in July at the fastest pace in 10 years, according to a survey of supply chain executives, despite setbacks in the oil industry. The Institute for Supply Management (ISM), a trade group that measures activity in services and manufacturing, said their non-manufacturing index rose to 60.3 from 56.0 in June. That’s the highest since the index reached 61.3 in August 2005. Any reading above 50 indicates expansion in the sector, which includes industries like arts, real estate, mining, agriculture and forestry.AP TIMBER HARVEST OREGON A FILE USA OR

That reading beat economists’ estimates of 56.2 in an Econoday survey and was well above the 12-month average of 57.4. The increase came from a broad-based improvement across several areas in the index. All categories measured by the survey saw increases, except for inventory sentiment, which indicates businesses think their stocks are still too high.

A measure of business activity ticked up to 64.9 from 61.5 in June, beating a record set in December 2004, while employment and new orders reached decade highs. Employment in the service sector rose to 59.6 from  52.7 in June. New orders, which foreshadow future economic performance, also jumped to 63.8 from 58.3 in June, reaching a decade high. Fifteen industries in the survey reported growth, while two, mining and other services, reported declines. Mining activities include oil and gas extraction, which has been hampered by low prices this year.

The non-manufacturing index is considered a barometer of economic health, since it is closely correlated with gross domestic product (GDP). A score above 48.7 , indicates that the overall economy is expanding, ISM said. The service sector is outpacing growth in the manufacturing sector, according to a separate survey released earlier this week.