Service sector expansion accelerated in August, ISM says

WASHINGTON -- The service sector, a backbone of the U.S. economy, unexpectedly expanded last month at its fastest pace in more than five years, the Institute for Supply Management said Thursday.

The group’s purchasing manager’s index jumped to 58.6 in August, up from 56 the previous month. It was the highest reading since ISM began tracking growth in nonmanufacturing industries in January 2008.

Economists had projected the index would drop to 55 last month. A reading above 50 indicates the sector is growing.

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Of the 18 industries tracked by the index, all but two reported growth in August. Those were mining and arts, and entertainment and recreation.

The group’s employment index rose in August, indicating expanded hiring. And the index for new orders, a measure of future activity, also was up.

Thursday’s service sector data followed an encouraging ISM report on manufacturing this week. Growth in that sector was up on a surge of new orders to its highest level in more than two years.

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