U.S. service firms grow at fastest pace since August

Washington • U.S. service firms grew at the fastest pace since August as new orders and sales grew, adding to other evidence that the economy is picking up after a slow start to the year.

The Institute for Supply Management said Monday that its service-sector index rose to 55.2 in April from 53.1 in March. Any reading above 50 indicates expansion. That's the highest level since last August. The ISM is a trade group of purchasing executives.

The figures come after a healthy jobs report on Friday also fueled hopes for an improving economy. The government said employers added 288,000 jobs in April, the most in 2 ½ years, and the unemployment rate fell to 6.3 percent.

The better data represents a turnaround after the government said last week that the economy barely expanded in the first three months of the year.

A measure of sales and production surged 7.5 points to 60.9 and a gauge of new orders jumped 4.8 points to 58.2. Both are the highest since August.

The survey covers businesses that employ 90 percent of the workforce, including retail, construction, health care and financial services firms.

A gauge of employment declined, though remained above 50. That indicates that services firms are adding jobs, but more slowly.

Anthony Nieves, chairman of the ISM's services survey committee, said the healthier picture mostly reflects solid increases in consumer demand. But the better spring weather also helped. One survey respondent in the hotel and restaurant industry said that business picked up because of a "break in the weather."

The report is "more evidence of growth reaccelerating after exaggerated weakness a couple of months ago," said Jim O'Sullivan, chief U.S. economist at High Frequency Economics.

Solid job creation has made Americans a bit more confident and more willing to spend. Consumer spending jumped in March by the most in 4 ½ years, as Americans bought more cars, clothes and furniture.

A separate report by the ISM last week showed that manufacturing also grew at a faster pace in April. A measure of hiring jumped to its highest level since December.