NAPM: US Services Sector Contracted Again

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A key gauge of U.S. service sector activity fell sharply to a new low in August, suggesting that major portions of the economy have contracted for four of the past five months as the gripping U.S. economic slowdown wears on.

The National Association of Purchasing Management said Thursday its monthly non-manufacturing index fell for a second straight month to 45.5 in August from 48.9 in July. Economists had expected a reading of 49.4. The drop followed a sharp bounce in NAPM's manufacturing index on Tuesday that had spurred hopes of a recovery.

A reading below 50 suggests declining activity in the services sector, which includes everything from transportation to legal and financial services. The non-manufacturing index was also below 50 in April, May and July.

The NAPM non-manufacturing new orders index, seen as a leading indicator of future activity, fell sharply, to 45.9 from 48.6 in July, while employment in the services sector decreased for the sixth consecutive month.

But the report also said non-manufacturing inventories decreased for the 10th consecutive month in August and at a faster pace than in July, while prices paid also fell for the second month in a row. The NAPM non-manufacturing index is compiled from a survey of more than 370 purchasing managers in more than 62 different service industries once a month.