US Service Sector Expands; Factory Orders Beat Estimates

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The pace of growth in the U.S. services sector increased slightly in November while U.S. factory orders expectantly rose in October, according to two industry reports released on Wednesday.

The Institute for Supply Management said its services index rose to 54.7 last month from 54.2 the month before. The reading topped economists' forecasts for growth of 53.5, according to a Reuters survey.

A reading above 50 indicates expansion in the sector.

The survey's business activity index jumped to 61.2 from 55.4 and was at its highest since February.

The new orders index also rose, hitting 58.1 after October's 54.8, to its highest since March.

However, the employment and prices paid indexes both fell to their lowest since July. Employment fell to 50.3 from 54.9, while prices paid dropped to 57.0 from 65.6.

In a separate report, new orders received by U.S. factories unexpectedly rose in October as demand for motor vehicles and a range of other goods offset a slump in defense and civilian aircraft orders, a hopeful sign for the manufacturing sector.

The Commerce Department said orders for factory goods increased 0.8 percent after a revised 4.5 percent rise in September. It was the second straight month of gains and beat economists' expectations for a flat reading.

Factory orders were previously reported to have jumped 4.8 percent in September.

Manufacturing, the pillar of the recovery from the 2007-09 recession, has lost momentum in recent months as fears of the "fiscal cliff" and slowing global demand slammed the economy.

There are worries that a wave of tax increases and sharp cuts in government spending early next year could suck $600 billion from the economy and push it into recession unless the Obama administration and the U.S. Congress can agree on a less painful plan to cut the budget deficits.

October's factory orders suggested that manufacturing was not heading for a hard landing, even though factories are struggling to regain momentum.

The Institute for Supply Management said on Monday its index of national manufacturing activity dropped last month to its lowest level since July 2009 when the economy was starting to emerge out of recession.

The Commerce Department report showed orders for transportation equipment fell 2.3 percent in October on weak civilian and defense aircraft. Orders for motor vehicles and parts rose 3.0 percent.

Factory goods orders excluding transportation rose 1.3 percent after advancing 1.2 percent in September.

Unfilled orders at U.S. factories rose 0.3 percent in October after increasing 0.1 percent the prior month. Shipments of factory goods increased 0.4 percent after rising 0.7 percent the prior month, while inventories edged up 0.1 percent.

The department said orders for durable goods, manufactured products expected to last three years or more, rose 0.5 percent instead of being flat as reported last week.

Durable goods orders excluding transportation were up 1.8 percent in October instead of up 1.5 percent. Orders for non-defense capital goods excluding aircraft — seen as a measure of business confidence and spending plans — increased 2.9 percent in October instead of the previously reported 1.7 percent increase.