Service industries in the U.S. expanded in March at the slowest pace in seven months as new orders and employment cooled.
The Institute for Supply Management’s non-manufacturing index declined to 54.4 from a one-year high of 56 in February, a report from the Tempe, Arizona-based group showed today. The median forecast in a Bloomberg survey called for a drop to 55.5. A reading above 50 indicates expansion.
The figures follow a decrease in the group’s factory index and signal the economy may find it hard to accelerate this quarter in the face of across-the-board cuts in the federal budget. At the same time, job growth and low borrowing costs may underpin sales at auto dealers and retailers such as Macy’s Inc. (M), while a resurgent housing market benefits realtors, builders and lenders.
“It is a temporary pause after running at a pretty heady clip,” Brian Jones, a senior U.S. economist at Societe Generale in New York, said before the report. Jones, who projected the index would decline to 53.7, had the lowest forecast among economists in the Bloomberg survey. “Consumer spending is going to be fine. The economy will pick back up in the second half.”
Estimates of the 73 economists in the Bloomberg survey ranged from 53.7 to 56.5 for the index, which accounts for almost 90 percent of the economy and includes industries from utilities and retail to health care, housing and finance. Before today, the gauge averaged 53.6 since the recession ended in June 2009.
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