WRAPUP 4-Upbeat U.S. data points to growth momentum

Wed Dec 4, 2013 3:17pm EST

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* Private employers add 215,000 jobs in November
    * Trade deficit narrows to $40.6 billion in October
    * Services sector still expanding, new home sales surge
    * Reports cast positive light on economy

    By Lucia Mutikani
    WASHINGTON, Dec 4 (Reuters) - U.S. private-sector hiring
rose in November at the fastest clip in a year, opening the door
wider for the Federal Reserve to start trimming its bond
purchases within the next few months.
    Other data on Wednesday also pointed to a brightening
outlook, with the services industry expanding at a decent pace
last month and exports hitting a record high in October. 
    There was also good news on the housing market as new home
sales posted their largest increase in nearly 33-1/2 years. 
    "The economy seems to be building enough momentum that
growth should accelerate as we move through the first part of
next year," said Joel Naroff, chief economist at Naroff Economic
Advisers in Holland, Pennsylvania.
    Private employers added 215,000 new jobs to their payrolls
last month, according to payroll processor ADP.
    It was the biggest rise in a year and beat economists'
expectations for a gain of 173,000 jobs. At the same time, the
figure for October was revised up to 184,000 from 130,000.
    The jobs data comes ahead of the government's much more
comprehensive employment count for November on Friday.
    That report, which covers both public and private sector
hiring, is expected to show an increase of 180,000 in nonfarm
payrolls after a 204,000 rise in October, according to a Reuters
poll of economists.
    Some economists said the ADP data suggested the government
report could show a larger gain than the consensus forecast.
Their optimism was tempered a bit by a gauge of services
industry jobs showing growth dropping to a six-month low for
November. 
    The upbeat tone was also captured by a separate report from
the Fed on Wednesday that described the economy as expanding at
a "modest to moderate pace" in October and early November.
 
    The signs of economic momentum weighed on U.S. Treasury debt
prices as traders speculated the Fed could begin to trim its
bond-buying stimulus as soon as its next meeting on Dec. 17-18.
U.S. stocks were trading lower, while the dollar reversed gains
versus the euro and the yen.
    "If the ADP does prove to be a good guide, a 200,000 plus
gain (in nonfarm payrolls) might just be enough to persuade the
Fed to begin its QE taper later this month," said Paul Ashworth,
chief U.S. economist at Capital Economics in Toronto.
    Other economists said, however, the Fed was still more
likely to wait until January or March to reduce its current $85
billion a month bond-buying pace.

 

    SERVICES SECTOR STILL GROWING
    Separately, the Institute for Supply Management said its
services index fell to 53.9 last month from 55.4 in October.    
A reading above 50 indicates expansion in the sector. November
marked the 47th straight month of growth in the services sector.
    A sub-index of services industry employment fell to its
lowest level since May, but also stayed in expansion territory.
    "The data are still suggesting at least a modest net pickup
in the trend in overall growth recently, even with this somewhat
weaker reading for November," said Jim O'Sullivan, chief U.S.
economist at High Frequency Economics in Valhalla, New York. 
    A separate report from the Commerce Department showed the
nation's trade deficit shrank 5.4 percent to $40.6 billion in
October, suggesting trade will likely contribute to growth this
quarter.
    Exports, which had declined for three straight months, hit
an all-time high, pointing to a pick-up in global demand.
    Imports also rose, reaching a 1-1/2 year high, as demand for
consumer goods and industrial supplies and materials increased.
    "This is an encouraging sign for both U.S. manufacturing
growth and the state of global demand," said John Ryding, chief
economist at RDQ Economics in New York. "There is a marked
acceleration in the imports of capital goods, which may signal a
brighter picture for capital spending."
    A survey of U.S. chief executives found spending on capital
goods and hiring were expected to rise in the next six months.
 
    In October, petroleum exports were the highest on record.
Exports to China, Canada and Mexico reached all-time highs in
October, while exports to the 27-nation European Union also
gained.
    In another report, the Commerce Department said new home
sales jumped 25.4 percent to a seasonally adjusted annual rate
of 444,000 units in October, more than unwinding September's 6.6
percent drop. That suggested the housing market recovery remains
intact despite higher mortgage rates.
    "Today's data shows evidence of the persistence of the
positive momentum in the housing market," said Ward McCarthy,
chief financial economist at Jefferies in New York. "Strong new
home sales will translate into rising building permits and
housing starts."
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