U.S. service industries, which account for the biggest chunk of the economy, expanded at a faster pace last month, economists said in advance of a private report being issued tomorrow. The Institute for Supply Management's index of financial services, retail and other non-manufacturing enterprises may have risen to 61.5 last month from 60.8 in February, according to the median of 43 forecasts in a Bloomberg News survey. Readings higher than 50 signal growth, and March would be the third consecutive month with an index higher than 60.
An improving global economy contributed to higher prices for fuel and other raw materials last month, and wholesalers probably added to inventories for a sixth month in February, separate government releases are forecast to show. Coming on the heels of Friday's report showing the economy gained the most jobs in almost four years, the numbers suggest executives are becoming more confident that demand will be sustained. ``Businesses have stopped being cautionary and have turned expansionary,'' Robert Mellman, a senior economist at J.P. Morgan Securities Inc. in New York, said. ``That is very bullish for growth. You are going to see faster production and a scramble to rebuild inventories.'' The January reading of 65.7 in the services index was the highest since records began in July 1997.
Feeding Employment
Non-manufacturing businesses, which make up almost 90 percent of the economy, accounted for all of the 308,000 jobs created last month, the Labor Department reported Friday. The increase in payrolls was the biggest since April 2000. Retail, construction, business services and education and health care were among the categories with the most jobs added. The hiring rebound may help President George W. Bush fend off criticism from Democratic challenger John Kerry about the loss of 1.8 million jobs during the Republican administration. Kerry said Friday that factory employment has yet to increase. First-time claims for unemployment insurance probably dropped by 2,000 to a total of 340,000 in the week that ended Saturday, the Labor Department is expected to report on Thursday. Claims reached a three-year low of 333,000 in the week that ended March 12. ``We're feeling a little more bullish on the economy,'' Ronald Sargent, chief executive of Staples Inc., the largest retailer of office supplies, said in an interview Friday. ``Existing customers, mostly small businesses, are buying more; and that's a good harbinger of jobs being created.''
Import Prices
Consumers are also spending. Wal-Mart Stores Inc., the world's largest retailer, said last week that U.S. sales this month are rising close to 6 percent from a year earlier, at the high end of their forecasts, as shoppers buy more Easter decorations and spring clothing. Shoppers were spending federal tax refunds after cashing checks in the stores, Wal-Mart said. The institute, based in Tempe, Arizona, surveys more than 370 purchasing managers from 62 industries monthly on orders, employment and other measures to gauge the strength of the service economy. Last week, the group's manufacturing index unexpectedly rose in March, approaching a two-decade high reached in January, as production increased. Services are ``strengthening in line with the improvement in manufacturing,'' Joseph Abate, a senior economist at Lehman Brothers Inc. in New York, said in a report to clients. The surge in manufacturing has stoked demand for imported fuels and other raw materials. A Labor Department's index of prices of imported goods, to be reported Wednesday, probably rose 0.6 percent in March rising 0.4 percent in February, according to the median estimate of economists surveyed. Retail gasoline prices rose 0.4 cent to a record a $1.755 a gallon on Thursday, according to the AAA, formerly the American Automobile Association.
Inventory Building
``There is a whiff of inflation in the U.S. air,'' Sherry Cooper, chief economist at BMO Nesbitt Burns in Toronto, said. ``All industrial commodity prices continue to surge with the synchronized global economic rebound.'' Growing demand is prompting business to rebuild depleted inventories. Distributors probably boosted stocks 0.3 percent in February after a 0.1 percent rise a month earlier, the Commerce Department is expected to report Thursday. A report last week by Commerce showed factory inventories rose 0.5 percent in February, the third increase in a row and the biggest since January 2001. In another report next week, consumers probably added $7.7 billion to their non-mortgage debt in February compared with an increase of $14.3 billion in January, the Federal Reserve is expected to report Wednesday. ///www.bloomberg.com