IE 11 is not supported. For an optimal experience visit our site on another browser.

U.S. services growth slowed in August

Growth in the vast U.S. services sector slowed in August although managers seemed more willing to hire new workers, according to an industry survey published Friday.
/ Source: Reuters

Growth in the vast U.S. services sector slowed in August although managers seemed more willing to hire new workers, according to an industry survey published Friday.

The Institute for Supply Management's non-manufacturing index declined to 58.2 in August, its lowest level this year, from 64.8 in July and well short of Wall Street estimates of 62.8.

"The ISM services number is another sign that the soft patch that took hold during the summer is threatening the third and fourth quarters," said Carl Tannenbaum, chief economist at LaSalle Bank in Chicago.

A number above 50 indicates growth, while a figure below that threshold denotes contraction in the sector, which accounts for about 80 percent of the U.S. economy.

The ISM survey's employment index edged up to 52.5 in August from 50.0, while demand for new orders decreased markedly, easing to 58.6 from 66.4. The prices paid index fell to 70.0 from 73.1.

The giant services sector encompasses everything from restaurants and hotels to banks and airlines.

Financial markets barely reacted to the data as investors were still digesting the government's latest employment report.

It showed employers added 144,000 new workers to their payrolls, stronger than in recent months but still below the level usually seen at this point in an economic recovery.

Combined, the two reports offered a murky view of the economic future, with some economists arguing overall growth will pick up in coming quarters and others contending that the expansion is petering out.

Retail and car sales figures earlier this week supported the more pessimistic camp, suggesting consumers — pressured by weakening purchasing power and higher energy costs -- are becoming more conservative when it comes to spending.

Forecasts for third-quarter growth in gross domestic product have drifted lower of late, with many economists reining in their predictions to a range between 3 percent and 4 percent.

"We've seen the economy slow somewhat from the pace seen at the start of the year," said David Sloan, economist at 4Cast Ltd.