Growth in U.S. Service Sector Slows During June

Growth in the U.S. service sector eased in June but remained strong, a government report showed Tuesday.

The Institute for Supply Management’s non-manufacturing data showed new orders and employment components gaining ground, but the overall index fell to 59.9 in June from 65.2 in May. Economists had been looking for a drop to 63.0.

Taken in the context of a recent pullback in the economic data, some economists viewed the report as more evidence that growth, while still solid, had started to ebb.

“It did decelerate to a still-strong pace, but in line with last week’s deceleration in jobs, car sales and consumption in general, so I have to believe that maybe it may be reflective of some moderation in the economy,” said Peter Kretzmer, senior economist at Banc of America Securities.

Any number in the survey above 50 indicates growth in services, which include a wide range of sectors such as restaurants, hotels, banks and airlines, accounting for about 80% of the U.S. economy.

A harbinger of growth, new orders edged up to 62.4 from 61.3 and more companies said they intended to take on new workers -- ISM’s employment index rose to 57.4 in June from 56.3 in May.

Like the service data, recent consumption figures also have exhibited signs of a slowdown, with June car sales reported last week falling far short of forecasts and retailers’ results lagging in general. That has prompted many economists to revise down their growth forecasts for the second quarter to about 3.5% from earlier estimates ranging from 4% to 5%.

A separate report showed that U.S. transportation activity rose to a record high in April.

The Transportation Department said its index for the sector rose 0.8% to 124.4 in April from a revised 123.4 in March.

The rise was the largest in the 14-year history of the survey, which is released by the Transportation Department’s statistics agency. April’s rise followed a 1.2% gain the previous month.