WASHINGTON – Growth in U.S. service industries eased more than forecast in July, foreshadowing a slower pace of economic expansion in the second half of the year, Bloomberg News Service reported Friday.
The Institute for Supply Management’s non-manufacturing index, including banks, builders and retailers, fell to 55.8 from 60.7 in June, the biggest drop in almost two years. Readings above 50 point to growth.
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Slowing consumer spending, the prospect of increased limits on borrowing and evidence of weaker economic growth are leading companies to hold off on their own purchases. Earlier today, the Labor Department said job creation cooled to 92,000 last month and the unemployment rate increased.
“The second quarter might have been a flash in the pan and we are off to a slow start in the third quarter,” said Paul Kasriel, chief economist at Northern Trust Co. in Chicago and a former Federal Reserve economist.
The economy expanded at a 3.4 percent annual rate in the second quarter, the government estimated on July 27, from 0.7 percent in the prior three months. Exports contributed more to growth, while consumers took a breather.
Employers in the U.S. added 92,000 jobs last month, fewer than economists expected, and the unemployment rate rose to 4.6 percent. While government and construction jobs declined, employment among private companies advanced at a faster rate.
Economists anticipated the ISM index would fall to 59, according to the median of 73 forecasts in a Bloomberg News survey. The measure averaged 56.8 in the past year.
