Service Sector Reports Show Strength

Growth in the nation's service sector accelerated sharply in October based on Markit Economics' U.S. sample where the final composite score is 54.8, unchanged from mid-month and up sharply from September's 52.3. Strength in consumer spending is what respondents reported as well as a rise in both input costs and selling prices. New orders are at an 11-month high as is business activity while year-ahead expectations are at their best level in a year-and-a-half. Backlogs are also piling up. This report points to a very solid fourth-quarter start for the bulk of the economy. Coming up next this morning will be ISM non-manufacturing which last month reported a very solid ending for the third-quarter.

...meanwhile...

Much of the ISM non-manufacturing report, at a composite of 54.8, is strong with employment, however, an exception, down 4.1 points from September to a 53.1 level that points to a slower pace of hiring in October. But new orders are very solid, at 57.7 but again now from September's 60.6. Business activity is also at 57.7 but is also down from September. Backlog orders grew for a second month and export orders remained solid and costs for the sample are up in another positive indication on demand. Employment growth may be down, but this report, like the services PMI, is pointing to a solid fourth-quarter start for the bulk of the economy.

Recent History Of This Indicator:
The ISM non-manufacturing index surged to 57.1 in September following what was a recovery low of 51.4 in August. This comparison aside, the index has been very steady this year and has been consistently showing solid rates of growth for the bulk of the nation's economy. New orders were especially strong in September, up nearly 9 points to 60.0 with employment also very solid, up 6.5 points to 57.2. Forecasters see the index giving back only some of September's gain with the October consensus at 56.1.