Service Sector Most Active In 11 Months: 6 Stocks To Scoop Up

A gauge of the U.S. service sector activity rose to the highest level last month in almost a year, primarily led by measures of business activity, new orders and employment. Thanks to the uptick, the service sector, covering the bulk of economic activity, has enough reasons to continue expanding in the near term.

Service sector activity has now expanded for eighty straight months, boosting an economy that has registered dismal growth this year. The service sector employs the vast majority of workers and covers an array of industries like retail, healthcare, finance, agriculture and construction. Given such promising trends, it will be prudent to invest in stocks in such sector.

ISM Gauge Hits a New High in 11 Months

According to the Institute of Supply Management (ISM), its non-manufacturing index climbed to 57.1 in September – the highest since Oct 2015. It’s a big improvement from August’s reading of 51.4, the lowest since Feb 2010. Any reading above 50 indicates expansion. Notably, 14 industries out of 18 registered growth.

Anthony Nieves, chairman of the ISM non-manufacturing survey, said that “It’s a rebound from the prior month”. He confirmed that there is strong growth in the service sector, a key segment of the economy. The economy has already expanded at a 1.4% pace in the second quarter, while it is positioned to gain traction in the final half of the year.

Business Activity High, More Orders Flow In

The business activity index, which parallels the ISM’s factory production gauge, rose to 60.3 in September, the highest since Oct 2015. On the other hand, the August reading of 51.8 was the weakest since the beginning of 2010. Nevertheless, business activity improved for the eighty-sixth consecutive month in September.

Industries that reported an increase in business activity confirmed that they have received more orders from clients. September also represented growth in new orders for the eighty-sixth successive month. The ISM’s new order count jumped to 60 in September from 51.4 in August, its highest monthly jump since Apr 2009.

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