Service industries in U.S. grow at slower pace than forecast

Service industries in the U.S. expanded in September at a slower pace than forecast, indicating a pause in the momentum of the biggest part of the economy before the federal government shut down. More

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Service industries in U.S. grow at slower pace than forecast

Posted 10/3/13

WASHINGTON - Service industries in the U.S. expanded in September at a slower pace than forecast, indicating a pause in the momentum of the biggest part of the economy before the federal government shut down.

The Institute for Supply Management’s non-manufacturing index dropped to 54.4 from the prior month’s 58.6, the biggest decrease since November 2008, the Tempe, Ariz.-based group said today. A gauge above 50 shows expansion. The median estimate in a Bloomberg survey of economists was 57.

A recent rise in mortgage rates may be tempering progress in the housing market, while the first government shutdown in 17 years threatens to slow demand for everything from auto purchases to air travel. At the same time, a report this week showing the fastest pace of manufacturing since April 2011 is helping underpin demand for services.

“It’s indicative of moderate expansion,” said Thomas Simons, an economist at Jefferies LLC in New York, whose services index projection of 55 was among the lowest in the Bloomberg survey. “What happens over the next few weeks with the fiscal debate is really going to have an impact on confidence and sentiment for the rest of the year.”

Stocks fell for a second day as investors weighed data showing a decline in a service industries index and data on jobless claims while lawmakers made little progress on ending the federal shutdown. The S&P 500 decreased 0.9 percent to 1,679.26 at 10:36 a.m. in New York.

Since June

The ISM non-manufacturing gauge, which fell to the lowest level since June, is hovering near the 54.7 average since the end of 2011. In August, the measure surged to the highest level since at least January 2008.

“We had such a spike [in August] that with this coming off to these levels, there’s still pretty good indication that there’s still growth going on,” Anthony Nieves, chairman of the survey, said in a call with reporters following the release.

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