On Thursday November 3, 2011, 6:31 am
WASHINGTON (AP) -- Service firms that employ about 90 percent of the U.S. workforce likely expanded at a faster pace in October, a sign the economy is growing at a modest pace.
Economists forecast that the Institute for Supply Management's service sector index rose to 53.5 from 53 in September, according to a survey by FactSet.
Any reading above 50 indicates the sector is expanding. The index covers a range of businesses from restaurants to hotels to financial services firms.
The report will be released at 10 a.m. Thursday. The ISM is a trade group of purchasing managers.
The index fell to its lowest level in 17 months in July. But it has ticked up a bit since then.
Despite high unemployment and weak wage growth, Americans spent more in September. That benefits restaurants, hotels, retailers and other services.
Economists worry that consumers won't be able to sustain the growth in spending, largely because their incomes aren't rising as fast.
Consumer spending rose 0.6 percent in September, the government said last week, while incomes increased only 0.1 percent. Americans financed the extra spending by dipping into savings.
The government said the economy expanded at a 2.5 percent annual pace in the July-September quarter, the best quarterly growth in a year.
That's strong enough to calm fears of another recession. Still, growth would have to be nearly twice as high -- consistently -- to make a major dent in the unemployment rate, which has been stuck near 9 percent for more than two years.
The ISM's report comes a day before the government releases its October jobs report. Analysts expect employers added 100,000 net jobs, nearly the same as the 103,000 added in September. The unemployment rate is expected to stay at 9.1 percent for a fourth straight month.
Federal Reserve Chairman Ben Bernanke said Wednesday that growth is likely to be "frustratingly slow," after the Fed sharply lowered its economic projects for the next two years.
The Fed now says the economy will likely expand no more than 1.7 percent for all of 2011. That's down from its June forecast of 2.7 percent to 2.9 percent. And it predicted growth of only 2.5 percent to 2.9 percent next year. In June, the Fed estimated growth of 3.3 percent to 3.7 percent in 2012.
The Fed said it doesn't expect the unemployment rate to be any lower this year. And it sees unemployment averaging 8.6 percent by the end of next year. In June, it had predicted unemployment would drop in 2012 to as low as 7.8 percent.
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