Service industries in U.S. grew less than forecast in June

July 5 (Bloomberg) -- Service industries in the U.S. expanded in June at the slowest pace since January 2010, a sign the biggest part of the economy is struggling to gain momentum.

The Institute for Supply Management’s non-manufacturing index dropped to 52.1, less than projected, from 53.7 in May, the Tempe, Arizona-based group said today. The median forecast of 70 economists surveyed by Bloomberg News called for 53. Readings above 50 signal expansion.

Companies from Family Dollar Stores Inc. to FedEx Corp. are seeing waning demand, underscoring concern about Europe’s debt crisis, cooling global markets and an absence of U.S. fiscal policy clarity that’s also hurting manufacturing. Limited hiring and income growth indicate households will be reluctant to step up purchases, which account for about 70 percent of the economy.

“We can’t seem to break out into a strong, sustained expansion,” Omair Sharif, a U.S. economist at RBS Securities Inc. in Stamford, Connecticut, said before the report. “Everything is still in fits and starts. The pace of growth isn’t enough to meaningfully reduce unemployment.”

Economists’ estimates in the Bloomberg survey ranged from 51.5 to 54.2. Before the latest numbers, the index averaged 53.4 since the recession ended in June 2009.

Stocks fell, snapping a three-day advance for the Standard & Poor’s 500 Index, as optimism with jobless claims data fizzled on concern over the outlook for global growth. The S&P 500 dropped 0.7 percent to 1,364.55 at 10:17 a.m. in New York.

Jobless Claims

Fewer Americans than forecast filed first-time claims for unemployment insurance payments last week, Labor Department figures showed. Applications for jobless benefits decreased 14,000 in the week ended June 30 to 374,000, the fewest since the middle of May.

Companies added more workers than forecast in June, according to a report from Roseland, New Jersey-based ADP Employer Services. The 176,000 gain last month followed a 136,000 rise the prior month that was higher than initially estimated.

The ISM non-manufacturing survey’s measure of business activity dropped to 51.7, the lowest since November 2009, from 55.6. The gauge of new orders decreased to an eight-month low of 53.3 from 55.5. An index of prices paid decreased to 48.9, the weakest since July 2009, from 49.8.

The employment gauge climbed to 52.3 from 50.8 in the prior month.

The ISM services survey covers industries ranging from utilities and retailing to health care and finance.

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