Services Industries in U.S. Grew at a Slower Pace in October

(Bloomberg) -- America's service industries expanded less than projected in October, consistent with moderate growth in the biggest part of the economy.

The Institute for Supply Management's non-manufacturing index fell to 54.8 from 57.1 in the prior month that was the strongest in almost a year, the Tempe, Arizona-based group's report showed Thursday. Readings above 50 signal expansion. The median forecast in a Bloomberg survey called for 56.

Slowdowns in orders and employment contributed to the weaker results for service producers, who account for about 90 percent of the economy. Together with the ISM's factory survey showing manufacturing struggling to gain traction, the figures underscore forecasts of more measured economic growth in the fourth quarter.

“This is still a moderate growth economy at best,” said Robert Dye, chief economist at Comerica Inc. in Dallas, who projected the index would cool to 55. “Domestic demand is well supported” for service providers, while “there are still headwinds for manufacturing.”

Economists' estimates in the Bloomberg survey ranged from 53.5 to 57.4. The latest reading is in line with the average 54.5 for the first nine months of the year.

The ISM group's non-manufacturing survey covers an array of industries including utilities, retailing and health care, and also factors in construction and agriculture.

Expansion, Contraction

Among the 13 of 18 industries reporting expansion during October were transportation and warehousing, construction and information. Five reported contraction, including educational services and mining, according to the report.

“We are still in a good place,” Anthony Nieves, chairman of the ISM non-manufacturing survey, said on a conference call with reporters. While employment softened, “we'll have to see how it turns out” in coming months.

The new orders measure fell to 57.7 from 60, while the employment gauge decreased to 53.1 from 57.2.

The business activity index, which parallels the ISM's factory production gauge, also decreased to 57.7 from the prior month's 60.3.

In a sign that inflation is picking up, the group's measure of prices paid climbed to 56.6, the highest since August 2014, from 54.

To contact the reporter on this story: Shobhana Chandra in Washington at schandra1@bloomberg.net. To contact the editors responsible for this story: Scott Lanman at slanman@bloomberg.net, Alister Bull