US ISM non-manufacturing index rises to five-month high in April

Activity in the US services sector expanded at its fastest pace in five months in April, increasing hopes that the American economy has bounced back from weakness at the start of the year.

The Institute for Supply Management's (ISM) non-manufacturing index, which surveys the sector's purchasing and supply executives, unexpectedly climbed to 57.8 last month from 56.5 in March.

This was the highest since last November and surprised economists looking for a small fall to 56.2. Readings above 50 reflect growth, while figures below indicate an contraction.

The ISM said the uptick in activity was due to the "improved economic climate and prevailing stability in business conditions".

The business activity sub-index jumped to 61.6 from 57.5, while the new orders component rose to 59.2 from 57.8. Meanwhile, the employment reading edged higher to 56.7 from 56.6, showing that growth was at its highest since October last year.

However, the prices index dropped to 50.1 from 52.4, showing that prices barely increased in April.

Figures out last week showed that annualised economic growth in the States slowed to just 0.2% in the first quarter of 2015, compared with a 4.4% expansion in the fourth quarter.

The services sector accounts for around 90% of the US economy as tracked by the ISM. The ISM's manufacturing sector purchasing managers' index released last week showed that growth was unchanged at a more tepid 51.5 in April.