JPM JP Morgan Chase and Co

By Ben Leubsdorf 

Revenue growth across the sprawling U.S. service sector continued to accelerate in the third quarter, a sign of health in key sectors of the economy.

Total revenue at service-providing firms rose an estimated 5.3% in the third quarter compared with a year earlier, the Commerce Department said Thursday, marking the strongest annual revenue growth since late 2014. In the first nine months of 2016, total revenue increased a solid 4.4% from the same period a year earlier, not adjusted for seasonal variations or price changes.

On an annual basis, revenues were up last quarter for 11 of 12 categories; the transportation and warehousing sector was the sole exception. Annual revenue growth picked up from the second quarter in the massive finance and insurance industry, though growth slowed in two other large segments: health care and social assistance; and professional, scientific and technical services.

The Commerce Department last week estimated that gross domestic product, a broad measure of the goods and services produced across the economy, expanded at an inflation- and seasonally adjusted annual rate of 3.2% in the third quarter.

That was the strongest growth in two years and bolstered by decent growth in consumer spending, which accounts for more than two-thirds of U.S. economic output.

Thursday's report could lead to a small upward revision for last quarter's GDP when the government releases its next estimate on Dec. 22. J.P. Morgan Chase economist Daniel Silver said the bank nudged up its estimate for third-quarter growth to 3.4% from 3.3%, assuming "slightly stronger services consumption" that was partly offset by "slightly weaker investment in intellectual property products."

Private-sector service industries account for the bulk of total U.S. employment, and Thursday's report offered hard data on revenue at service-providing firms ranging from hospitals and amusement parks to insurers and funeral homes. In the past, the QSS report has occasionally led to significant revisions for estimates of consumer spending and overall U.S. economic growth.

The Commerce Department also announced that starting next year, it plans to publish earlier estimates for service-sector revenues each quarter, allowing the government to incorporate the data into its second quarterly GDP estimate rather than the later third estimate. It is the agency's latest effort to speed up the release of economic data, following an early reading on international trade that was introduced in 2015 and new advance estimates for retail and wholesale inventories that were unveiled earlier this year.

"Private sector data users and other government agencies will both benefit from an earlier release of U.S. services data," the agency said on its website.

A private-sector gauge of nonmanufacturing business activity has been choppy this year, though it has signaled continuous expansion since early 2010.The Institute for Supply Management index averaged 54.7 in the third quarter, down slightly from its average of 55.0 in the second quarter, but rose in November to 57.2 -- its highest level in more than a year.

Write to Ben Leubsdorf at ben.leubsdorf@wsj.com

(END) Dow Jones Newswires

December 08, 2016 12:03 ET (17:03 GMT)

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