US service sector optimism soars

Business confidence in the bulk of the economy is riding high

Activity in the US services sector hit a record high in March, according to the influential Institute of Supply Management survey.

The service sector - shops, banks, the leisure industry, airlines - accounts for about 80% of the US economy.

Meanwhile, the Conference Board survey of US chief executives found confidence at a 20-year high in the first three months of 2004.

The two reports are further evidence of a pick-up in US economic growth.

Last week, US Labor Department data showed a surge in US firms hiring new staff in March, leading economists to predict the end of the so-called jobless recovery.

Jobs could boost Bush

The Conference Board survey also found signs of more jobs in the pipeline.

All the pistons in the engine are firing Wells Fargo Bank chief economist

The issue of slack employment growth has dogged President George W Bush's re-election campaign.

"Half of all CEOs surveyed anticipate an increase in hiring plans over the course of the year," said Conference board economist Lynn Franco.

The Conference board index of business confidence jumped seven points, giving a reading of 73 for the first quarter of 2004, its highest level since 1983.

The ISM index of activity in the non-manufacturing sector leapt to 65.8 in March, up five points from February and its highest reading since the ISM survey began in July 1997.

"It is a very encouraging report, indicating that the economy is moving forward and upward...all the pistons in the engine are firing," said Wells Fargo Bank chief economist Sung Won Sohn.

New orders

Firms questioned by ISM reported a rise in new orders and a longer backlog of orders, though new export orders were slightly lower.

The ISM index climbed for the twelfth month in a row, and beat economists forecasts for a reading of 61.8.

The US economy has been growing strongly in the last two quarters of 2003, with a growth rate of over 4%.

But its failure to create many jobs so far had sparked a fierce political debate about the effect of trade and outsourcing of jobs.

Mr Kerry has accused the Bush administration of encouraging US firms to relocate jobs abroad.