The largest part of the U.S. economy slowed in July for a second month, adding to evidence the recovery is losing momentum.
The Institute for Supply Management’s index of retail, financial, construction and other non-manufacturing enterprises fell to 53.1 last month from 57.2 in June. The gauge, covering about 85 percent of the economy, hasn’t been lower since dropping in January to less than 50, the threshold for contraction.
A 26 percent drop in the Standard & Poor’s 500 Index so far this year and a slowdown in hiring are shaking consumer confidence and may erode spending, economists said. Walt Disney Co. is among companies saying that profits will decline this quarter, and Wal-Mart Stores Inc., the world’s largest retailer, says July sales will be at the low end of forecasts.
Stocks fell and U.S. Treasury securities rose after the report. Economists had expected the services index to drop to 55, according to the median of 33 forecasts in a Bloomberg News survey.
The Tempe, Arizona, institute’s index is a companion to its manufacturing survey, which last week showed new orders to factories stalled and production expanded at a reduced pace. The factory index declined to 50.5, the weakest reading since a contraction in January.
Bloomberg News
