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Business Is Booming In The U.S. Services Sector

Written by Ken Gaebler
Published: 6/4/2014

The U.S. services sector is growing at the fastest pace since last August as overall activity increased by the largest margin since 2008. But will it last?

The services sector is a vital part of the U.S. economy. Job growth, disposable income and other important economic variables hinge on the health and vibrancy of small service providers, many of which experienced sluggish activity over the past several years.

Services Sector Boom

But the latest data shows that the pace of activity is picking up in the services sector. According to a Daily Finance report, in April the U.S. services sector accelerated at the fastest pace in eight months and the level of activity quickened at a rate that hasn't been seen since early 2008.

The Institute for Supply Management's Services Sector Index jumped to 55.2 in April from 53.1 in March, outperforming the forecasted read of 54.1. Daily Finance also noted that data from the report indicates that economic activity is coming back on track after nasty weather hampered the industry throughout the winter.

Likewise, the Markit Flash U.S. Services PMI Index reported an increase to 58.4 so far in May, up from it's read of 55 in April, reaching the highest level since March 2012. The Markit report showed that the volume of new business in the services sector increased at the fastest pace in more than three years and U.S. service providers are adding jobs to keep up with increased demand.

But for small service providers, the big question is whether the uptick in activity is here to stay or is it merely a short-term blip on the industry radar?

"An improving service sector picture reinforces the upbeat message from the equivalent U.S. manufacturing survey in May," said Tim Moore, senior economist at Markit. "As a result, the pendulum appears to be swinging towards firmer economic growth into the summer months."

From an effective goal setting standpoint, service providers have reason to be cautiously optimistic, especially with multi-month increases in order levels. But in the end, only time will tell if the latest data is the beginning of a long-term trend that lays the groundwork for significant growth and expansion.

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