The pace of growth in the vast US services sector edged up in May driven by gains in new orders, a welcome comfort after recent disappointing economic data. The Institute for Supply Management (ISM) said on Tuesday its services index edged up to 53.7 from 53.5 in April; economists had expected the index to hold steady at April's level.
A reading above 50 indicates expansion in the sector, which accounts for about two-thirds of US economic activity. Although the data offered a positive note after other recent signs suggesting the recovery is losing traction, the index was still well off the level of 57.3 seen in February. The survey's forward-looking new orders component rose to a reading of 55.5 from 53.5, while the measure of prices paid declined to the lowest level since July 2009, at 49.8 from 53.6.
The decline in prices was attributed to lower fuel costs, said Anthony Nieves, chair of the ISM non-manufacturing index business survey committee. ISM's report on the US manufacturing sector last week included a similar improvement in new orders, suggesting that signs of a softening pace of output and employment growth do not reflect a significant decline in demand, Peter Newland, a senior economist at Barclays, wrote in a note. But the employment component fell to its lowest level since last November, adding to signs that job growth is slowing, after last week's disappointing employment report. The index fell to 50.8 from 54.2.
Separate data released on Tuesday was more encouraging, with a rise in US home prices in April seen as a fresh sign of stabilisation for the troubled housing market. Data analysis firm CoreLogic said its home price index rose 2.2 percent in April from the previous month and gained 1.1 percent from the year before. Excluding sales of distressed properties, which are typically sold at a significant discount, prices jumped 2.6 percent for the month and were up 1.9 percent on a yearly basis.
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