Strong consumer demand sparks service sector growth

By Christopher S. Rugaber
Associated Press / January 6, 2011

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WASHINGTON — Strong consumer demand pushed a key measure of the economy’s service sector to its highest level in more than four years, the latest evidence that the economy is gaining strength and job growth could pick up in the new year.

The Institute for Supply Management, a trade group of purchasing executives, said yesterday that its index of service sector activity rose to 57.1 in December. Any reading above 50 indicates growth.

Last month’s reading was the highest since May 2006 and marked the 12th straight month of expansion for the sector, which employs 80 percent of the workforce. The index plummeted to 37.2 in November 2008, at the height of the financial crisis. The sector contracted for all but two months in 2009, then began expanding last year.

A major reason for the gains is that people are spending more money. Companies covered by the survey — everything from health care to retail to financial services — received the highest number of orders for business in five years. That, along with a solid year of expansion, suggests the broadly defined sector could be an engine of job growth in 2011.