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

Orders Drop

The ISM’s measure of new orders in the service industries decreased to 59.6 in September from 60.5 in August. A gauge of employment at non-manufacturing companies dropped to 52.7, the weakest since May, from 57. Nine industries reported gains in employment, while seven said it fell.

Business activity slumped to 55.1 from 62.2, the report showed. Twelve industries reported increased activity, while five said it decreased.

The ISM’s manufacturing index, released earlier this week, unexpectedly rose to 56.2, the strongest since April 2011, from 55.7 a month earlier, as employment and production measures improved.

Service industries in other parts of the world are showing signs of improvement. Services in the U.K. expanded in September, capping the best quarter for the industries in 16 years. A gauge of activity was at 60.3 after reaching a seven- year high of 60.5 in August, Markit Economics said today in London.

Euro-area services grew more than initially estimated and a Chinese gauge rose to a six-month high, separate reports showed.

Home Building

In the U.S., an increase this year in homebuilding has boosted service providers such as home-improvement retailers, furniture chains and real estate companies. Producers of furniture, appliances and building materials have also benefited.

Further progress depends in part on the outlook for borrowing costs. The rate on 30-year home loans averaged 4.32 percent in the week ended Sept. 26, the lowest in two months. It reached a two-year high of 4.58 percent in the week ended Aug. 22.

Car sales have been another bright spot in the economy. All four of General Motors Co. brands posted double-digit retail sales increases in the third quarter, Kurt McNeil, vice president of U.S. sales, said on an Oct. 1 sales and revenue call.

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