Growth in the giant U.S. services sector eased more than expected in June, although new orders grew and job prospects improved moderately, a survey showed on Tuesday.
The Institute for Supply Management’s non-manufacturing index fell to 59.9 in June from 65.2 in May. Wall Street analysts had been looking for a dip, but only to 63.0.
A number above 50 indicates growth in services, which include everything from restaurants and hotels to banks and airlines, accounting for about 80 percent of the U.S. economy.
“It did decelerate to a still strong pace, but in line with last week’s deceleration in jobs, car sales and consumption in general, so I have to believe that maybe it may be reflective of some moderation in the economy,” said Peter Kretzmer, senior economist at Banc of America Securities.
More companies said in the survey they intended to take on new workers — ISM’s employment index rose to 57.4 in June from 56.3 in May. A harbinger of growth, new orders edged up to 62.4 from 61.3.
Inflationary pressures continued to build, with the prices paid index inching up to 74.6 from 74.4.
Financial markets barely reacted to the ISM services data.
Analysts had worried that with inflation picking up and the job market looking better, the Federal Reserve would have to raise interest rates faster than originally anticipated.
Yet a disappointing employment report on Friday helped soothe such concerns, overshadowing a drop in announced job cuts reported on Tuesday by research firm Challenger, Gray and Christmas.
The company said planned layoffs in the United States fell to 64,343 in June, down from May’s 73,368.
Last week, the Labor Department said June U.S. non-farm payrolls grew by 112,000 jobs, less than half the level economists had forecast. Job gains in April and May were also revised lower, painting a much less favorable jobs picture.
Recent consumption figures have also exhibited signs of a slowdown, with June car sales reported last week falling far short of forecasts and retailers’ results lagging in general.
That has prompted many economists to revise down their forecasts for growth in the U.S. economy for the second quarter, to around 3.5 percent from between 4 and 5 percent.
