updated 12/5/2006 10:49:23 AM ET 2006-12-05T15:49:23

The service sector of the U.S. economy grew at a quicker pace in November than in the previous month, shaking off some effects of the housing slump, a trade group said Tuesday.

Major Market Indices

The Tempe, Ariz.-based Institute for Supply Management reported that its index of activity in the service sector, which makes up about two-thirds of the nation’s economy, rose to 58.9 in November from 57.1 in October.

The results came in ahead of analysts’ forecast of 55.5.

A reading above 50 indicates expansion, while a reading below 50 signals contraction. November marked the 44th consecutive month of expansion in non-manufacturing industries.

The index for the service sector is one of the earliest readings on economic activity in the prior month.

The service sector report follows last Friday’s ISM report that the nation’s manufacturing sector shrank for the first time in nearly four years.

The service sector is not as sensitive to the problems in housing and the automotive industry that dragged down the manufacturing index, said Stuart Hoffman, chief economist at PNC Financial Services Group in Pittsburgh.

It is more diverse, encompassing banking, construction, retailing and travel, among other industries. Service businesses don’t experience the same inventory gluts that are clogging up manufacturing operations, he said.

The better-than-expected reading “just reaffirms what the Fed and what the stock market have been saying,” Hoffman said. “Manufacturing and construction are weak, but there’s strength in other parts of the economy.”

“We are weathering the pulldown from housing and autos and it hasn’t infected the rest of the economy,” he said.

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