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US Service Growth Slows in December: ISM

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US Service Growth Slows in December: ISM

The US service economy expanded at a slower pace than forecast in December, as half of the non-manufacturing industries contracted during the holiday season.

The Institute for Supply Management’s gauge of US service activity fell 0.9 percentage points to 53.0 in December, a six-month low. A median estimate of economists polled by Bloomberg called for 54.7.

The service industries to report gains include management companies and support services, retail trade, and financial services. Of the industries to report declines, mining, entertainment and recreation, and education were the hardest hit, as the holiday season extended its joy to select segments of the service economy.

The decline in business activity didn’t hinder employment, which expanded for the seventeenth consecutive month. ISM’s employment index shot up 3.3 percentage points to 55.8. The Labor Department will report on December nonfarm payrolls on Friday. Analysts expect US employers to have added 194,000 payrolls last month.

“Business is steady,” said one respondent from the construction industry. “We are at year-end and the holidays, so it’s a little quiet. Expect things to pick up after the first [of the year].”

According to a manager from arts, entertainment and recreation, “Early, severe winter weather has had a major impact on business. Both customers and employees were unable to reach the workplace.”

Service activity was down across the board, according to separate PMI reports from Markit Group. Service activity in the Eurozone hit a four-month low, raising concern the 17-nation currency bloc could face sustained growth headwinds in 2014. In the UK, service activity declined for the second straight month, but remained strong, with business confidence reaching the highest level in nearly four years.

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