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Service sector grows slightly in January

February 3, 2010 |  9:42 am


The U.S. service sector grew in January for the first time since September but is still lagging behind the manufacturing industries, according to a report released Wednesday.

A gauge of performance in non-manufacturing businesses reached 50.5 from 49.8, according to the Institute for Supply Management. Any mark above 50 represents growth, according to the private trade group, which is based in Tempe, Ariz.

The index has trailed the group’s manufacturing measure, which jumped from 54.9 to 58.4 in January, its highest level in five years. The “blah economic numbers” showed the sector “edging back into expansion territory” but were “by no means indicative of robust growth,” according to a note from the economics division at PNC Financial Services Group Inc.

“Ongoing losses in construction employment remain a drag on the index, but other industries reported slack labor conditions as well, including hotels and restaurants, wholesale trade, information and financial services,” PNC researchers said.

The employment index, measuring the service sector’s hiring plans, grew to 44.6 from 43.6 but still showed contraction.

Of 18 industries surveyed, just four reported growth, including utilities and wholesale trade. Arts and entertainment, retail and transportation were among the 11 industries that shrank in January.

But business activity expanded last month, though the index fell a percentage point to 52.2.

New orders rose for the fifth straight month to 54.7 from 52 as prices increased to 61.2 from 59.6. Inventories slowed substantially, tumbling to 46.5 from 51.5 in December.

-- Tiffany Hsu

Photo: A store on Santa Monica's Third Street Promenade hopes to draw post-holiday shoppers. Credit: Christina House / For the Los Angeles Times