The U.S. service sector is forecast to show contraction last month, but less than it shrank in June, according to a Reuters' poll of economists.

The Institute for Supply Management's services index is estimated to have risen to 48.0 in July from 47.0 in June, according to a median forecast culled from the Reuters poll.

A reading below 50 suggests the sector is contracting.

Estimates from the 66 economists polled ranged from a low of 46.6 to a high of 49.3.

The services sector includes businesses like banks, airlines, hotels and restaurants, representing about 80 percent of U.S. economic activity.

The Institute for Supply Management will release the July non-manufacturing index at 10 a.m. EDT on Wednesday.

A sampling of forecasts and analysis on the upcoming non-manufacturing index follows:

UBS INVESTMENT RESEARCH/US ECONOMIC PERSPECTIVES

FORECAST: 48.0

The non-manufacturing ISM index averaged 44.9 in Q2 after 41.8 in Q1 and 40.7 in Q4. It probably rose again in July, but likely remained below the zero-growth 50 mark. Our estimated 'all-economy' ISM index, which combines the manufacturing and non-manufacturing surveys, will likely show the same pattern.

NOMURA SECURITIES:

FORECAST: 48.8

Non-manufacturing output should continue to recover as the economy moves toward growth in the second half. However, the steady decline in services employment suggests the sector remains under some pressure.

MICHAEL MORAN, CHIEF ECONOMIST, DAIWA SECURITIES AMERICA:

FORECAST: 48.5

The gradual turn in the economy could lead to further improvement in the ISM non-manufacturing index in July. The new orders and business-activity components have increased briskly in recent months, settling just shy of 50 percent in June. The supplier delivery component has lagged, but a catch-up in July could pull the composite measure higher.

(Polling by Bangalore Polling Unit)

Manufacturing