US economy grew at a 5.7 percent, the most in six years

Service Industries in U.S. Probably Grew as Recovery Broadened
Feb. 3 (Bloomberg) — Service industries in the U.S. probably expanded in January at the fastest pace in more than a year, a sign the recovery is broadening, economists said before a report today.

The Institute for Supply Management’s index of non- manufacturing companies, which make up almost 90 percent of the economy, rose to 51 from 49.8 in December, according the median estimate of 75 economists surveyed by Bloomberg News. Readings above 50 signal growth. A separate report may show companies last month cut the fewest jobs in two years.

Growing exports and efforts to stabilize inventories stoked a factory rebound six months ago that is strengthening and spreading to other areas, giving companies like United Parcel Service Inc. a lift. The recovery has yet to generate the jobs needed to boost consumer spending back to pre-recession levels, one reason why the Federal Reserve has pledged to keep interest rates low.

“We are in a sustainable, but somewhat slow, recovery,” said Zach Pandl, an economist at Nomura Securities International Inc. in New York. “Services didn’t contract as much as manufacturing in the recession and they aren’t rebounding as fast.”

The report from the Tempe, Arizona-based purchasers’ group is due at 10 a.m. New York time. Survey estimated ranged from 49 to 53.

Private Payrolls

Figures from ADP Employer Services at 8:15 a.m. may show companies cut 30,000 jobs in January, according to the median estimate of economists surveyed. The decline would compare with an 84,000 drop in December. The ADP report includes only private payrolls and doesn’t take into account government employment.

The economy probably created more jobs than it lost in January for the second time in the past three months, economists project a Feb. 5 report from the Labor Department will show. Payrolls rose by 8,000 employees last month, according to the median estimate of economists surveyed, as the federal government began hiring temporary workers to carry out the 2010 population count.

Retailers are among companies still cutting jobs. Atlanta- based Home Depot Inc. last week began eliminating 1,000 positions after sales at older stores fell 6.9 percent in the quarter ended Nov. 1.

“Household spending is expanding at a moderate rate, but remains constrained by a weak labor market, modest income growth, lower housing wealth, and tight credit,” Fed policy makers said after their meeting last month. The central bankers kept the benchmark interest rate on overnight loans between banks near zero and said it would remain “low” for an “extended period.”

Lags Manufacturing

The ISM services survey includes industries like retailing, utilities, health care, housing, transportation and finance and insurance. The measure has lagged behind the group’s manufacturing gauge, which rose in January to the highest level in five years as factories ramped up production to rebuild inventories and meet increasing global demand.

The economy grew at a 5.7 percent annual pace in the fourth quarter, the most in six years, the government reported last week. It was the second quarter of growth following a year-long contraction that marked the deepest recession since the 1930s.

Consumer spending which accounts for 70 percent of the economy, rose at a 2 percent pace, compared with an average 2.8 percent increase per quarter in the six-year expansion that ended in December 2007.

Stocks Rise

Shares rebounded along with the economy. The Standard & Poor’s 500 Index has climbed 63 percent since reaching a 12-year low on March 9.

United Parcel Service is among companies seeing an improvement. Atlanta-based UPS yesterday said first-quarter profit would be “slightly better” than a year ago, signaling that the world’s largest package-delivery company expects a slow start to a recovery that builds through the year.

“Economic forecasts indicate gradual improvement as 2010 unfolds,” Kurt Kuehn, UPS’s chief financial officer, said in a statement. “The first quarter will be the most challenging of the year for UPS with profitability only slightly better than last year.”

EBay Inc., the most-visited U.S. e-commerce site, reported Jan. 20 that its profit topped analysts’ estimates, boosted by holiday shopping and the sale of its Skype Internet-calling unit.

               Bloomberg Survey

                               ADP   ISM Non-
                           Payroll     Manu
                            ,000’s    Index

Date of Release              02/03    02/03
Observation Period            Jan.     Jan.
Median                         -30     51.0
Average                        -33     51.0
High Forecast                   50     53.0
Low Forecast                  -110     49.0
Number of Participants          37       75
Previous                       -84     49.8
4CAST Ltd.                    -110     51.0
Action Economics               -65     51.0
Aletti Gestielle SGR          ---      50.5
Ameriprise Financial Inc       -30     52.5
Banesto                        -55     51.3
Bank of Tokyo- Mitsubishi     ---      52.8
Bantleon Bank AG              ---      50.6
Barclays Capital              ---      51.5
Bayerische Landesbank         ---      50.5
BBVA                           -58     50.8
BMO Capital Markets            -40     50.2
BNP Paribas                    -30     51.5
BofA Merrill Lynch             -20     50.5                   -60     52.1
C I T I C Securities           -40     51.5
Calyon                        ---      50.6
Capital Economics             ---      51.0
CIBC World Markets            ---      51.0
Citi                          ---      51.0
ClearView Economics           ---      51.0
Commerzbank AG                 -10     51.0
Credit Suisse                 ---      51.0
Daiwa Securities America      ---      51.5
Danske Bank                   ---      51.6
DekaBank                      ---      50.5
Desjardins Group              ---      51.1
Deutsche Bank Securities      ---      51.0
Deutsche Postbank AG          ---      50.8
DZ Bank                         -5     50.5
Exane                         ---      50.8
First Trust Advisors          ---      50.5
Fortis                        ---      50.5
Goldman, Sachs & Co.          ---      51.0
Helaba                        ---      50.2
Herrmann Forecasting           -25     51.7
High Frequency Economics      ---      52.0
HSBC Markets                   -20     52.0
IDEAglobal                     -10     52.0
IHS Global Insight            ---      51.5
Informa Global Markets         -10     50.5
ING Financial Markets          -20     50.5
Intesa-SanPaulo                -20     51.0
J.P. Morgan Chase             ---      50.5
Janney Montgomery Scott        -60     50.6
Jefferies & Co.               ---      50.3
Johnson Illington Advisors      50     50.5
Landesbank Berlin             ---      51.0
Maria Fiorini Ramirez         ---      51.0
MF Global                     ---      51.5
MFC Global Investment          -25     51.5
Mizuho Securities              -75     50.0
Moody’s            -50     50.8
National Bank Financial       ---      51.0
Natixis                        -40     51.1
Nomura Securities Intl.        -90     51.0
Nord/LB                        -40     50.0
PineBridge Investments        ---      53.0
PNC Bank                      ---      49.0
Prestige Economics            ---      50.5
RBS Securities Inc.           ---      50.8
Schneider Foreign Exchange       6     52.1
Scotia Capital                 -50     52.0
Societe Generale              ---      52.0
Standard Chartered            ---      51.0
Stone & McCarthy Research     ---      49.2
TD Securities                  -10     51.0
Thomson Reuters/IFR            -20     ---
Tullett Prebon                 -30     50.5
UBS                           ---      51.0
UniCredit Research            ---      51.0
Union Investment               -40     ---
University of Maryland         -40     50.8
Wells Fargo & Co.             ---      50.1
WestLB AG                      -20     51.0
Westpac Banking Co.            -40     50.5
Woodley Park Research           14     52.3
Wrightson Associates           -30     51.0
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