US service sector posts lackluster growth

WASHINGTON: The key US services sector suffered a sharper-than-expected fall in growth in June, raising further doubts about the pace of recovery in the world's largest economy.

The Institute of Supply Management said its non-manufacturing index declined to 53.8 points from 55.4 in May.

Most economists had expected the June figure to be at 55.0 after relatively steady readings in the prior three months.

The latest data indicated "continued growth in the non-manufacturing sector, but at a slightly slower rate," Anthony Nieves, chairman of the ISM's non-manufacturing business survey committee, said in a statement.

The institute said economic activity in the non-manufacturing sector grew for the sixth consecutive month in June based on a survey of the nation's purchasing and supply executives.

Any number above 50 per cent indicates growth in the sector that accounts for more than two-thirds of US economic activity.

However, business activity and employment components of the index declined while new orders slumped for the third month in a row.

"The index still shows modest improvement from earlier in the year, but the June reading does suggest some loss of momentum at the end of the second quarter," said Aaron Smith, a senior economist for Moody's Economy.com.

"Today's report on the non-manufacturing activity brought negative news but remains consistent with our scenario of a slowing down (of) economic activity," said Thomas Julien, US economist for Natixis.

The US economy started to grow in the middle of 2009 after a severe recession that struck in December 2007.

President Barack Obama said on Friday the US economy was headed in the right direction, but not quickly enough, after new jobs figures added to fears the recovery was slowing.

The Labor Department reported Friday a net loss of 125,000 jobs last month even as unemployment fell to 9.5 per cent, its lowest rate in almost a year.