U.S. Service Sector Growth Slows

From Reuters

The U.S. service sector expanded for the ninth straight month in October, though at a slightly slower pace than in September, a report said Tuesday, another sign that the economic recovery has lost momentum.

The report, by the Institute for Supply Management, supports expectations that the Federal Reserve will make only a modest cut in short-term interest rates at its regular policy meeting today, to try to shore up the recovery.

Meanwhile, separate reports on U.S. chain store sales showed sluggish growth. Economists worry that consumer spending, which already has slowed, could stall in coming months.

Instinet Research said in its weekly Redbook report that store sales fell 0.6% in the four weeks ended Nov. 2, while the Bank of Tokyo-Mitsubishi and UBS Warburg reported that store sales rose 1.1% in the week ended Saturday after a 1.9% fall the previous week.


The Institute for Supply Management said its monthly index of non-manufacturing activity fell in October to 53.1 from 53.9 in September, above forecasts for a decline to 51.7 and above the key 50 mark, indicating the sector still is expanding.

“The report was consistent with very sluggish growth, but we haven’t reached the point where it’s consistent with negative growth,” said Alan Ruskin, research director at 4Cast Ltd.

Two components that are key barometers of future growth raised warning flags: New orders slowed in October to 50.9 from 52.3, the lowest point since January, and employment continued to contract.

The service sector makes up about 80% of the U.S. economy and includes such areas as financial services, transportation and entertainment.