Service-sector growth accelerated slightly in May, ISM says

WASHINGTON -- The U.S. service sector expanded at a slightly faster rate in May than the previous month, data released Wednesday by the Institute for Supply Management indicate.

The positive reading from the institute's survey of service providers came amid some recent negative economic data, including ISM's report Monday that its index of manufacturing activity hit a four-year low last month.

Service businesses are the largest part of the U.S. economy. ISM's closely followed service-sector index rose to 53.7 in May from 53.1 the previous month.

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The gain exceeded analyst expectations of a rise to 53.5.  A reading above 50 indicates the sector is expanding.

It was the 41st straight month of growth in the sector, ISM said. Indexes that track business activity and new orders in the service sector were up in May, while the employment index was down.

The report showed the service sector performing better in the face of automatic federal spending cuts than U.S. factories.

ISM said Monday its manufacturing index dropped to 49 in May from 50.7 the previous month, showing the sector contracted for the first time since November. It was only the second contraction since mid-2009, when the Great Recession technically ended.

The manufacturing and service index readings were in line with May private-sector jobs figures released Wednesday by payroll processing firm ADP. Manufacturing jobs were down a net 6,000 from the previous month, while service-sector payrolls grew by 138,000 jobs.

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