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, Arizona-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.
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.
Estimates of the 75 economists in the Bloomberg survey ranged from 55 to 59. The figure includes industries that range from utilities and retail to health care, housing and finance and make up almost 90 percent of the economy.
Another report today showed fewer Americans than forecast filed applications for unemployment benefits last week, indicating U.S. employers were maintaining staff counts in the days leading up to the government shutdown.
Jobless claims rose by 1,000 to 308,000 in the week ended Sept. 28, the Labor Department said in Washington. The median forecast of 50 economists surveyed by Bloomberg called for a rise to 315,000.