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Services Sector Soars in August

By Justin Loiseau - Sep 5, 2013 at 12:00AM

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All signs point to positive growth ahead.

The services sector improved in August for the 44th consecutive month, according to the Institute for Supply Management's Report on Business, which was released today.

The Institute's Non-Manufacturing Index registered an overall 58.6% rating, a 2.6 point increase from July's 56% reading. An above-50 index denotes positive change from the previous month, and August's improvement equates to increasingly fast growth in the services sector. Analysts were pleasantly surprised, having expected a slowdown to 55%. 

ISM Non-Manufacturing Index Chart

ISM Non-Manufacturing Index data by YCharts 

The index is comprised of four main components. Business activity increased 1.8 points, to 62.2%, new orders added 2.8 points, to hit 60.5%, employment jumped 3.8 points, to 57%, and prices paid for purchased materials and services fell 6.7 points, to 53.4%.

All of these components point to strong gains for the services sector. Business activity serves as a sign of present conditions, new orders give a nod to future profits, employment alludes to confident employers, and prices give businesses a bit more wiggle room.

Sixteen of 18 reporting services industries registered growth in August, led by education and management/support services. Mining, and arts, entertainment, and recreation, reported contractions.

Fool contributor Justin Loiseau has no position in any stocks mentioned. You can follow him on Twitter @TMFJLo and on Motley Fool CAPS @TMFJLo.

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