U.S. service sector contracted in Nov: ISM survey
The U.S. services sector unexpectedly contracted in November, with an index measuring activity falling to its lowest reading since July, according to an industry report released on Thursday.
The Institute for Supply Management said its services index shrank to 48.7 in November from 50.6 in October. That was below the 51.5 median forecast of 62 economists surveyed by Reuters. The dividing line between growth and contraction is 50.
The index broke above the growth mark in September, at 50.9, after 11 months of below-50 readings. The index for September was the highest since it posted 51.2 in May 2008.
The September and October levels had encouraged investors and economists to hope the U.S. economic recovery was gaining momentum.
It's a disappointing number, said Gary Thayer, chief macrostrategist at Wells Fargo Advisors in St. Louis.
Manufacturing is being helped by low inventories, but the service sector is taking longer to get a turnaround started.
The services sector represents about 80 percent of U.S. economic activity and includes businesses such as banks, airlines, hotels and restaurants.
Seeing that number below the 50 there, that to me is pretty harsh, said Dan Cook, senior market analyst at IG Markets in Chicago. The markets will view it as that.
U.S. stock indexes turned lower after the report. U.S. Treasury debt prices pared losses, and the euro trimmed gains against the dollar. <.SPX>
The index's business activity component fell to 49.6 in November, the lowest reading since July, from 55.2 in October. It rose above 50 in August for the first time since September 2008.
The prices paid component of the index rose to 57.8 in November from 53.0 in October, the highest reading since August.
The new orders index fell to 55.1 in November from 55.6 in October.
The orders subindex is still above 50 which is positive, but while we did get a bump up in the service sector, things are cooling off again, Thayer said.
The employment index rose to 41.6 last month from 41.1 in October. The reading for September was 44.3.
(Reporting by Nick Olivari, Ellen Freilich and Chuck Mikolajczak; Editing by Padraic Cassidy)
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