Services Sector Expands at Slower Pace

The giant U.S. services sector grew for the ninth straight month in December, but the pace of expansion slowed, a report showed Tuesday, confounding economists who expected a greater increase.

A steady reading on employment from the Institute for Supply Management’s non-manufacturing survey did little to change optimistic forecasts on Wall Street for a fifth month of U.S. employment gains.

ISM’s overall non-manufacturing index dropped to 58.6 in December from 60.1 in November, falling far short of Wall Street forecasts of 61.3. The employment index fell to 54 from 54.9 in November, which was its highest level since March 2000.

An index reading above 50 indicates expansion; one below 50 indicates contraction.

New orders accelerated, with that index rising to 61.2 from 60.1, and the prices index rose to 60 in December from 58 the previous month.

The services industry, which includes hotels, travel agencies and chain stores, accounts for about 80% of the U.S. economy.

In another report, new orders for U.S. factory goods sank in November, staging the largest drop in more than half a year, the government said Tuesday.

Factory orders dropped 1.4% in November, the Commerce Department said, after rising 2.4% the previous month. The decline was close to Wall Street expectations of a drop of 1.5%.

But the drop was largely obscured by a surprise jump in December manufacturing, which ISM reported last week, and by robust auto sales for that month.

Vehicle sales for December, released late Monday, proved far stronger than even the loftiest estimates.