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ISM Services Rises In November Before Fiscal Cliff

Data provided by the Institute for Supply Management (ISM) reveals that the rate of expansion in the U.S. services industry picked up in November, even as market participants speculated about the potential of the nation's economy going over the fiscal cliff.

Accelerating Services 

Data provided in the ISM report indicates that the organization's non-manufacturing index (NMI) rose to 54.7 in November, from 54.2 in October. The November reading was higher than the median forecast of a drop to 53.5 that was provided by economists participating in a Bloomberg survey.

Any figure for the NMI above 50 represents expansion in the services sector, which represents a far greater portion of U.S. gross domestic product than manufacturing. November was the 35th consecutive month of growth in the nation's services industry, according to the business officials who contributed to the poll.

The survey represented a broad range of industries - including agriculture, information, forestry, professional, scientific and technical services, fishing and hunting, utilities, health care and social assistance, retail, construction, public administration, real estate, rental & leasing and finance & insurance.

The ISM data indicating more robust expansion in the services sector could be interpreted to mean that a wide range of U.S. industries are doing well and benefiting from strong demand even as market participants look head to the looming fiscal cliff.

"The non-manufacturing sector is very diverse," Anthony Nieves, the chairman of the ISM survey, told Bloomberg in a telephone interview. "Because it’s made up of 18 industries with a slew of companies, small, medium and large, it's like having a diverse stock portfolio. You’re not heavy in one particular sector or investment, so the overall effects or impacts from political uncertainty are not as immediate as you would see on the manufacturing side."

Resilience 

According to the news source, the data contained in the survey indicates that the wide range of industries that make up the services sector - which contributes around 90 percent of GDP - are holding up well amid the widespread economic uncertainty that exists right now as a result of the budget negotiations being conducted by U.S. lawmakers.

Consumer confidence is being bolstered by lower energy costs, a strengthening job market and improvement in the housing market, the media outlet reports. This better sentiment was recently illustrated by robust sales during Black Friday Weekend.

"The consumer is carrying a lot more of the economic momentum into the end of the year, given the cautiousness of business leaders," Joel Naroff, president of Holland, Pennsylvania-based Naroff Economic Advisors Inc., told the news source. "That bodes well for next year."

Many corporations have pulled back on capital spending, amid an uncertain economic environment that has been caused by factors such as the fiscal cliff and turmoil in the euro zone.

Strong Consumer Sentiment  

"Consumers are feeling good, housing is rebounding, and we remain confident that there’ll be a resolution in Washington" on the existing budget disputes, Kurt McNeil, General Motors Co. vice president of sales operations, stated during a teleconference on December 3, according to the media outlet.

Data provided industry by information provider Ward’s Automotive Group reveals that auto dealers experienced surging demand in the aftermath of Hurricane Sandy. Cars and light trucks were sold at an annualized rate of 15.5 million during the period, which was the highest since February 2008.

What is your services firm doing to harness the existing economic tailwinds that are persisting even in spite of adverse factors like the fiscal cliff?

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