TEMPE, Ariz. – The Institute for Supply Management today said its index of non-manufacturing business fell to 54.3 in February from its January reading of 59. The number indicates that the sector – which includes banking, construction and retailing – grew at its slowest pace in four years, and well below the expected reading of 57.1, Bloomberg News said.
The index’s new-orders component fell to 54.8 points from January’s 55.4; the inventories index rose to 50.5 from 47; and the backlogs index fell to 47 from January’s 49. The prices-paid index fell to 53.8, from 55.2. The employment index, meanwhile, rose to 52.2 from 51.7, indicating that hiring picked up speed.
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Stagnant property prices, which make it more difficult for home owners to use equity loans to extract cash from their assets, were blamed for the slowdown. “The downtrend in home prices threatens consumer borrowing and consumer spending as a whole,” said Avery Shenfeld, a senior economist at CIBC World Markets Inc. in Toronto.
The ISM report followed a downgrade of fourth quarter GDP growth last week. While the U.S. economy for the year grew 3.3 percent, compared with 3.2-percent growth in 2005, the annual rate for the fourth quarter was revised down to 2.2 percent. First-quarter projections are for 2.5-percent growth, according to a survey of economists by Bloomberg News.
The full ISM report is available at www.ism.ws.
