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US service economy slows in November: ISM

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US service economy slows in November: ISM

The US service economy expanded for the 47th consecutive month in November, albeit at a slower pace, according to the Institute for Supply Management.

The ISM’s gauge of non-manufacturing activity fell from 55.4 to 53.9 in November, the lowest in five months. The median estimate of economists surveyed by Bloomberg was 55.0. A reading above 50.0 signifies expansion in the service economy, whereas a reading below that threshold indicates contraction.

Broad slowdowns in business activity and employment were the main culprits for the decline, with the employment index falling 3.7 percentage points to 52.5. The service economy added 176,000 private payrolls in November, according to the ADP Institute. New orders declined only marginally and were close to October levels, lending further support for sustained, incremental growth in the non-manufacturing industries.

In total, 11 non-manufacturing industries reported growth, led by transportation and warehousing, retail trade and management/support services. The monthly survey showed the service economy was still on the right track, as companies remained optimistic about short-term business conditions.

“Business is steady at this time, with little fluctuation from last month,” said one manager from healthcare and social assistance. “Optimistic fourth quarter in sight,” said another from the information sector. However, regulatory uncertainty emanating from the government shutdown continued to weigh on consumer confidence, according to a representative from retail trade.

“The breadth of improvement in services has narrowed over the last few months, but the non-manufacturing part of the economy continues to grow,” said Ryan Sweet of Moody’s Analytics. “New orders signal that we’ll continue to see steady growth for the remainder of this year and into 2014.”

The service economy was unable to keep pace with the manufacturing industry, which expanded at a faster pace in November. New orders, increased production and better hiring conditions helped elevate 15 of the 18 manufacturing sectors.

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