ISM service sector index expected to grow in November for 3rd straight month

Ahead of the Bell: ISM service sector index

NEW YORK — A private trade group’s measure of the U.S. service sector is expected to show accelerating growth in March as the economy added jobs and consumer spending slowly increased.

The Institute for Supply Management’s service index likely rose to 54 last month from 53 in February, according to economists polled by Thomson Reuters. February’s reading was the strongest since January 2008.

The report is expected at 10 a.m. EDT Monday.

Any reading above 50 signals growth. That threshold was broken in September for the first time in 13 months. The service sector’s recovery has been bumpy since, lagging a resurgence in manufacturing as hesitant consumers remain wary of big purchases amid high unemployment.

The service sector is important as it accounts for 80 percent of U.S. jobs excluding farmworkers. It includes jobs in areas like health care, retail and financial services. The sector is highly dependent on consumer spending, which powers about 70 percent of the economy. Consumers have been stressed throughout the recession by job losses, stagnant wages and a rocky real estate market.

Retail sales have begun to improve this year, however, as the labor market improves. Chains from children’s clothing seller Gymboree Corp. to pet products store PetSmart Inc. have impressed Wall Street with their improving outlooks. Even luxury department store Saks Inc. has posted three straight months of rising sales in stores open at least a year.

The labor market also seems healthier. In February ISM said its measure of employment shrank for the 26th straight month. But last week, government data showed the economy added 162,000 jobs in March, the biggest month of job creation in 3 years. The unemployment rate remains 9.7 percent.

In its report, the Labor Department said service-producing companies added 82,000 jobs last month.