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Services grow for first time in a year

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Phil Coale/AP/File

(Read caption) Shoppers move through the check-out line at a Wal-Mart in Tallahassee, Fla. Retail sales was one of five industries reporting growth in September, according to a new report.

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The US service sector is showing signs of expansion after 11 months of contraction.

A closely watched index of nonmanufacturing industries climbed to 50.9 percent in September, up from 48.4 percent in August -- and better than many analysts anticipated. A companion index for new orders also climbed to 54.2, its first sign of growth since September 2008, according to a report by the Institute for Supply Management released Monday. Any reading above 50 suggests that business is expanding.

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Even with the overall index pointing to growth, conditions among individual industries varied. Five industries -- healthcare, retail trade, construction, and wholesale trade -- reported they were expanding, according to the ISM survey. But 13 others, led by arts and entertainment and agriculture, contracted.

But is this growth here to stay? Employment in the services sector continues to contract, according to the ISM, and the overall services index remains below the ISM companion manufacturing index, writes Paul Dales, an economist at Capital Economics, in an analysis.

"The economic recovery is less entrenched in the areas that are less exposed to the fiscal stimulus, the rebound in world trade and the fall in the dollar," he writes. "Once the initial burst to growth from these factors fades, we fear that the US economy will be left without much forward momentum."
-- Catch up with our better-than-expected expansion on Twitter.