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ISM: Service Sector Activity Growth Slows

Activity in the service economy grew at a slower rate in July than in the previous month, a private research group said Wednesday.

The index of business activity in the non-manufacturing sector slipped to 60.5 last month from 62.2 in June, according to the Institute for Supply Management (search). The index was slightly lower than the 61 reading that analysts had forecast.

It was the 28th consecutive month of expansion. A reading of 50 or above means the services sector of the economy is expanding, while a reading below 50 indicates a contraction.

Still, investors were disappointed with the report.

The ISM said that new orders and backlog of orders increased faster but employment increased more slowly in July than in June.

Thirteen industries reported growth in July, led by construction and insurance. Two industries — real estate and health services — reported the same rate of activity. The lone industry reporting decreased activity from the prior month was agriculture.

Ralph Kauffman, who runs the ISM's survey committee for the services sector, said in a statement that price increases are one of the primary concerns at the current time.

The price component of the report showed a rise of 10.5 percent, indicating that recent jumps in energy costs are having a direct impact on the non-manufacturing industries. The Tempe, Ariz.-based research group said there were no unusually large changes in other indexes in the report.