Dominant US Service Sector Slows In November

Activity in the US service sector, which makes up lion's share of the world's largest economy, slowed unexpectedly last month, according to a survey released Wednesday.

The soft reading in the Institute for Supply Management's index followed a surprise drop in private sector hiring in November, as well as further slowing in the ISM manufacturing index, underscoring the weakening US economy.

The dominant service sector remains in far better health than the trade-war-battered manufacturing sector, which has been in contraction for four straight months, according to ISM.

ISM said its non-manufacturing index slid 0.8 point to 53.9 percent, which was below forecasts and lower than the average for the prior 12 months. Any reading above 50 indicates expansion.

"All indications are, from our respondents, the sector remains on a good pace of continued growth," ISM survey chair Anthony Nieves told reporters.

The monthly report showed 12 industries, led by real estate, reported an expansion, while five, dominated by agriculture and mining, were in decline.

"When you look at the overall contributions to GDP, real estate, rental and leasing is one of the higher contributors to that," Nieves said.

A tight labor supply continued to pose a problem, leaving companies working harder to fill positions and feeling pressure to offer higher wages, he said.

The US-China trade war, which has badly hurt global manufacturing, continued to be a drag and survey respondents "hope for a resolution on tariffs," the report said.

Business activity tumbled 5.4 points to 51.6 percent. New orders, including exports, rose 1.4 points but that was not enough to increase the backlog of orders, suggesting activity may not rise.

RDQ Economics said the details in the report were stronger than the overall result.

"In short, there is no evidence here that the trade-related slowdown in manufacturing is spilling over in a significant way into the rest of the economy," the firm said in an analysis.