AP News

Ahead of the Bell: US Services Index


U.S. service companies likely grew more slowly in November than October because consumers cut back on spending and Superstorm Sandy halted business activity in many states.

Economists forecast that the Institute for Supply Management's index of service firms fell to 53.7 in November from 54.2 in the previous month, according to a survey by FactSet. The report will be released at 10 a.m. EST on Wednesday.

Any reading above 50 indicates expansion.

The index fell slightly in October, after rising to its highest level in six months in September. Companies reported slower sales and fewer new orders.

The report measures growth at businesses that employ roughly 90 percent of the U.S. work force, from retail and construction companies to health care and financial services firms. The service sector has grown for 34 straight months.

Superstorm Sandy reduced consumer spending and incomes in October, the government said last week. That's likely to slow sales at retailers and other service firms. Sandy tore through the Northeast Oct. 29, shutting down businesses and cutting off power to 8 million homes in 10 states.

Consumer spending fell 0.2 percent that month, the Commerce Department said, the weakest showing since May. Incomes were unchanged.

Work interruptions caused by the storm reduced wages and salaries by about $18 billion at an annual rate, the government said.

While economists blamed Sandy for much of the drop in spending, they also said it would likely have been weak even without the storm.

There have been other signs that are Americans are reluctant to open their wallets. Consumer spending rose only 1.4 percent at an annual rate in the July-September quarter. That was below the second quarter's 1.5 percent pace.

The overall economy grew at an annual rate of 2.7 percent in the July-September quarter, up from 1.3 percent growth in the April-June period.

The ISM reported last week that its separate index for manufacturing showed manufacturing fell to its lowest level since July 2009, one month after the recession ended. Businesses are ordering fewer manufactured goods because of worries that taxes will rise sharply and government spending will be cut early next year.

Service companies have been a key source of job growth this year. They have created about 90 percent of the net jobs added since January. Still, many of the new service jobs have been low-paying retail and restaurant positions.


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