Service sector grows at fastest pace in six months

The service sector expanded in September at the fastest pace in six months, an indication that the economic recovery is getting back on track after a slow summer. 

The Institute for Supply Management (ISM) reported Wednesday that its index of non-manufacturing activity increased to 55.1 last month — up from 53.7 in August, the best showing since March — on improved business activity and new orders,  

Readings above 50 percent signal expansion. 

The index is a survey of a wide variety of businesses — the sector employs 90 percent of all workers, including those employed at restaurants, hotels and retailers.

The news is another indication of the slow but steady economic recovery, a positive for President Obama heading into his first debate of the election season with Republican presidential nominee Mitt Romney on Wednesday night. 

In a separate report on Wednesday, payroll processor ADP said the economy added 162,000 private-sector jobs in September. 

The Labor Department's report, which includes government jobs, is due out Friday. 

Economists are expecting the economy to have added 130,000 jobs last month, which would be an improvement over the disappointing August report of only 96,000. 

There was more good news on Monday when ISM's manufacturing report showed that the sector bounced back in September after contracting for three months on improvements in new orders and employment. 

The service sector has expanded for 33 straight months, and has seemingly rebounded from a sluggish summer of growth. 

Business activity expanded to 59.9 in September, up from 55.6 in August with businesses saying they are seeing steady increases in consumer demand. 

New orders grew for the 38th consecutive month, registering 57.7 up from the 53.7 in August. 

Employment continued to expand but at a slower pace, falling to 51.1 last month from 53.8 in August, with mixed comments from businesses that reported they were either adding workers or trying to make do with fewer people. 

Businesses also reported that prices increased in September up to 68.1 from the 64.3 reported in August. 

In September, 28 percent reported rising prices while 71 percent said prices were unchanged.