Service sectors grew at slower pace in June

The service sectors of the U.S. economy continued to grow in June but at a slower pace, according to a survey of companies released Tuesday by the Institute for Supply Management.

The ISM nonmanufacturing index fell to 53.8% last month after holding at 55.4% for the last three months.

This is the lowest level since February.

Economists surveyed by MarketWatch had expected the ISM index for June to decline to a reading of 54.5%.

Readings above 50% indicate that more firms are expanding than contracting. The index has been above 50% since the turn of the year. But growth in services has been mediocre and has lagged behind the strength in manufacturing.

Economists said the report was consistent with other indicators that show a downshift in the pace of growth. Analysts are not forecasting a double-dip recession; instead they see growth in the 2% range in the second half of the year.

“A mid-cycle slowdown is taking shape which will impact the North American economic zone primarily in the third and fourth quarters of 2010,” wrote Brian Bethune, chief U.S. financial economist at IHS Global Insight.

In June, 15 industries reported growth and two reported contraction.

The ISM employment index showed that job growth is contracting, falling to 49.7% for June from 50.4% the previous month.

The business-activity index fell to 58.1% from 61.1% in May.

The new-orders index fell to 54.4% from 57.1% in May. The prices-paid index fell to 53.8% in June from 60.6% in the previous month.

Robb writes for MarketWatch.com/McClatchy.