WRAPUP 2-US services sector grows at fastest clip since ’06

* Services sector grows for third straight month

* Pending home sales unexpectedly rise

* Data adds to optimism after last week’s jobs report

By Wanfeng Zhou and Steven C. Johnson

NEW YORK, April 5 (BestGrowthStock) – The U.S. services sector grew
at its fastest pace in nearly four years in March and future
home sales unexpectedly rose in February bolstering hopes for
sustainable economic recovery and job growth.

The vast U.S. services sector, which has been lagging other
areas of the economy, accounts for some two-thirds of U.S.
economic activity. Analysts say growth in this sector bodes
well for consumer spending and overall employment.

The positive news on U.S. service and housing activity,
coupled with last Friday’s solid jobs report raised
expectations the Federal Reserve will tighten monetary policy
sooner rather than later.

“The improvements in the U.S. economy should give the Fed
the nudge that they need to unwind emergency measures and
tighten monetary policy more quickly,” said Kathy Lien,
director of currency research at GFT in New York. “The
milestones the service sector and housing market reached
reflect not only the strength of the recovery, but also the
rosier prospects that lie ahead.”

The Institute for Supply Management said its service index
grew in March for a third straight month, jumping to 55.4, its
strongest reading since May 2006. That was up from February’s
53.0 reading and above economists’ forecasts for 54.0 for
March. For more, see [ID:nEAP100023]

A reading above 50 indicates expansion in the sector.

“The service sector lags other areas of the economy and the
March data provided another optimistic indication that the
recovery is gaining traction,” said Joseph Brusuelas, chief
economist at Brusuelas Analytics in Stamford, Connecticut.

U.S. interest rates are set to stay near zero for the time
being, though the U.S. Federal Reserve stands ready to take
action if signs of inflation begin to mount, top central bank
officials said earlier this month.

U.S. benchmark Treasury yields (US10YT=RR: ) touched 4
percent for the first time in 10 months on Monday amid
expectations the Federal Reserve will pursue a less
accommodative monetary policy to forestall a pickup in
inflation.

U.S. stock indexes rose and the dollar pared losses against
the yen after the data, which bolstered hopes that the economy
is recovering swiftly from a deep recession.

The ISM non-manufacturing index also showed its employment
component rose slightly in March, while new orders jumped as
well.

“The data confirms the increase in service sector
employment in the March non-farm payroll report and supports
our call of a rate of growth in the first quarter of 3.0
percent,” Brusuelas said.

The Conference Board, a private research group, said the
U.S. job market strengthened for a seventh straight month in
March, with fewer Americans having trouble finding work.
[ID:nNLL5FE63U]

Economists say job growth is essential for continued
economic expansion, particularly as government stimulus
spending starts to fade. And despite improvements in the labor
market, the jobless rate remained at 9.7 percent in March for a
third straight month.

A separate report on Monday from the National Association
of Realtors showed contracts for pending sales of previously
owned homes unexpectedly rose in February. [ID:nN05176276]

The Realtors said its Pending Home Sales Index, based on
contracts signed in February, rose 8.2 percent to 97.6 from a
downwardly revised 90.2 in January.

Analysts polled by Reuters had forecast pending home sales,
which lead existing home sales by one to two months, would
remain essentially unchanged in February.

Reports last week showed the U.S. manufacturing sector grew
for an eighth straight month in March, expanding at its fastest
pace since July 2004, while U.S. employers added jobs last
month at the fastest rate in three years.

“Looks like the good news continues,” said Alan Gayle,
senior investment strategist at Ridgeworth Investments in
Richmond, Virginia. “All this suggests that the economic
recovery is spilling over into job creation.”
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Graphics
U.S. service sector growth: http://link.reuters.com/wad56j
U.S. pending home sales: http://link.reuters.com/jad56j
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Stock Market Analysis

(Additional reporting by Corbett B. Daly and Lucia Mutikani in
Washington and Camille Drummond, Ryan Vlastelica and Emily
Flitter in New York; Editing by Andrew Hay)

WRAPUP 2-US services sector grows at fastest clip since ’06