U.S. service companies expand at slower pace
WASHINGTON (AP) - U.S. service companies, which employ roughly 90 percent of the work force, expanded more slowly in April. Companies saw less growth in new orders and hired at a weaker pace.
The Institute for Supply Management says its index of non-manufacturing activity dropped to 53.5 last month from 56 in March. Any reading above 50 indicates expansion.
The ISM's survey covers all sectors outside of manufacturing. That includes retail, construction, financial services, health care, and hotels.
The slowdown in services comes as consumers have reined in their spending a bit. Consumer spending rose in March, but by much less than in the two previous months.
Americans are spending more on goods, such as cars and appliances, but are holding back when it comes to services. A government report Monday showed that spending on services was flat in March.
The ISM's services index reached the highest point in a year in February, when it was 57.3. Consumers stepped up their spending that month at the fastest pace in seven months.
And in the first quarter, Americans increased their spending at the fastest pace in a year. But most of those gains were in January and February. And Americans spent more while saving less, a trend that economists worry isn't sustainable.
The job market is improving, but incomes are barely growing. That could weigh on consumer spending in the coming months, dragging on the services sector.
Manufacturing has been the driving force behind the economic recovery. Economists would like to see services firms contribute more. On Tuesday, the ISM said that the manufacturing sector expanded at its fastest pace in 10 months. Measures of new orders, production and employment all rose. But manufacturing accounts for only about 12 percent of U.S. output.
Services firms need to step up hiring to accelerate job gains and rapidly push down the unemployment rate. The service sector includes low-paying positions in retail and restaurants. But it also has higher-paying jobs in professions such as information technology, accounting and financial services.
The government will release the April employment jobs report on Friday. Economists are predicting that employers added 163,000 jobs, and the unemployment rate will remain 8.2 percent.
The Institute for Supply Management says its index of non-manufacturing activity dropped to 53.5 last month from 56 in March. Any reading above 50 indicates expansion.
The ISM's survey covers all sectors outside of manufacturing. That includes retail, construction, financial services, health care, and hotels.
The slowdown in services comes as consumers have reined in their spending a bit. Consumer spending rose in March, but by much less than in the two previous months.
Americans are spending more on goods, such as cars and appliances, but are holding back when it comes to services. A government report Monday showed that spending on services was flat in March.
The ISM's services index reached the highest point in a year in February, when it was 57.3. Consumers stepped up their spending that month at the fastest pace in seven months.
And in the first quarter, Americans increased their spending at the fastest pace in a year. But most of those gains were in January and February. And Americans spent more while saving less, a trend that economists worry isn't sustainable.
The job market is improving, but incomes are barely growing. That could weigh on consumer spending in the coming months, dragging on the services sector.
Manufacturing has been the driving force behind the economic recovery. Economists would like to see services firms contribute more. On Tuesday, the ISM said that the manufacturing sector expanded at its fastest pace in 10 months. Measures of new orders, production and employment all rose. But manufacturing accounts for only about 12 percent of U.S. output.
Services firms need to step up hiring to accelerate job gains and rapidly push down the unemployment rate. The service sector includes low-paying positions in retail and restaurants. But it also has higher-paying jobs in professions such as information technology, accounting and financial services.
The government will release the April employment jobs report on Friday. Economists are predicting that employers added 163,000 jobs, and the unemployment rate will remain 8.2 percent.
