I.S.M. Reports Slower Growth at Services Companies

WASHINGTON (AP) — Growth at service companies slowed slightly in January as a result of weaker new orders and slower business activity. But hiring improved, providing a bright sign for the economy.

The Institute for Supply Management said Tuesday that its index of nonmanufacturing activity dipped to 55.2 in January. That was down from 55.7 in December, which was the highest level in nearly a year. Any reading above 50 indicates expansion.

The modest decline from December’s strong reading suggests the industry was not greatly hampered by an increase in Social Security taxes that reduced take-home pay for most Americans.

Companies did not single out the rise in payroll taxes in the survey, Anthony S. Nieves, chairman of the I.S.M.’s survey committee, said in a conference call with reporters.

The report measures growth in industries that cover 90 percent of the work force, including retailing, construction, health care and financial services.

Over all, economists were encouraged by the steady reading in the services index, as well as a sharp jump in the institute’s January manufacturing index released last week. The reports suggest economic growth is rebounding in the quarter from January to March, after shrinking from October to December.

A gauge of hiring in the services report rose to its highest level in nearly seven years. That was consistent with the solid job gains reported by retailers, construction companies and other service firms in the government’s January employment report, released last week.

Service and construction companies have added an average of nearly 195,000 jobs a month in the last three months. The increase in the employment gauge suggests the solid hiring will continue.

Paul Dales, an economist at Capital Economics, attributed the dip in the overall I.S.M. index to the Social Security tax increase. “But this blow has been small and cushioned by stronger demand in other sectors, namely construction,” he said.

Article source: http://www.nytimes.com/2013/02/06/business/economy/ism-reports-slower-growth-at-services-companies.html?partner=rss&emc=rss