NEW YORK (Reuters) - The U.S. services sector grew in January at its fastest pace since August 2005, according to an industry report released on Thursday.
New orders received by U.S. factories edged up in December and shipments of finished products were stronger, signaling a continuing pickup in activity for the nation’s manufacturing sector.
* The Institute for Supply Management said its index of national non-manufacturing activity rose to 59.4 in January from 57.1 in December. The median forecast of 68 economists surveyed by Reuters was for a reading of 57.0.
* Total factory orders rose 0.2 percent to a seasonally adjusted $426.8 billion — contrary to forecasts for a 0.5 percent decline made by Wall Street economists surveyed by Reuters and following an upwardly revised 1.3 percent boost in November orders.
CHANNING SMITH, VICE PRESIDENT OF CAPITAL ADVISORS, TULSA, OKLAHOMA:
“The economy continues to accelerate and the overall trend of good data continues. Today the market will focus on comments from Trichet and Bernanke to see if there will be any hints about interest rates.
“Investors will also likely be on hold until there’s some clarity coming out of Egypt. However, the market seems to have a backstop with these good numbers, both on earnings and data.”
“I think both reports indicate that growth momentum in the U.S. remains very strong. The January ISM non-manufacturing index is particularly important. This suggests upside risk to our Q1 forecast. All the key components: employment, overall business activity and new orders, are all increasing.
“Taking the two ISMs together, they really are a great coincident measure of economic activity and both are saying that the recovery is accelerating.
“The downdraft in the data late summer 2010 turned out to be misleading. Partly it was just a head fake. But you have also had some improvement in financial conditions: a big rise in stock prices, still-low interest rates, easing bank lending conditions, a still-weak dollar. We’re starting to see that turn into some real improvement in activity here.
“In don’t think there are any rate hikes in the immediate future. The Fed cares about gaps, not growth, and you still have a lot of spare capacity and an inflation rate far below target.”
PAUL RADEKE, VICE PRESIDENT AT THE MINNEAPOLIS-BASED KDV WEALTH MANAGEMENT:
“We’re encouraged by the (ISM) read this month, which can signal an acceleration of our recovery. That should translate into market confidence, barring any headline risk, which could include Egypt and European sovereign debt.”
JEOFF HALL, ECONOMIST, IFR ECONOMICS, A UNIT OF THOMSON REUTERS:
On ISM data: “Stronger than expected and just plain strong. Employment over 54, with an impressive 93 percent correlation to private service-producing payrolls. Gird for strong employment if weather doesn’t muck it up.
GARY THAYER, CHIEF MACROSTRATEGIST, WELLS FARGO ADVISORS, ST. LOUIS, MISSOURI:
“It was a strong number. Positive readings for job situation and orders. Export orders appeared to be turning a little soft; it’s a trend we have to watch.”
MARKET REACTION: STOCKS: U.S. stocks maintain losses. BONDS: U.S. Treasury bond prices extend losses. FOREX: The dollar extends gains versus the euro.