Service sector growth slowest since 2010

Wed Aug 3, 2011 12:52pm EDT
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By Leah Schnurr

NEW YORK (Reuters) - The pace of growth in the services sector ticked down unexpectedly in July to the lowest level since February 2010 and the number of jobs created by the private sector also slowed, reports showed on Wednesday.

Taken alongside disappointing data on the manufacturing sector earlier in the week, the services data showed an economy that was frustrating hopes for a rebound in the second half of the year after a very weak first half.

"It looks like this confirms that we are in a bit of a soft patch here," said Rudy Narvas, senior economist at Societe Generale in New York.

"It is not pointing to recession, but we still have to see how the data turns out -- the data is a little bit all over the place these days and the risk is things are not looking as bright as they were in June or prior to that."

While the weakness in the first months of the year had been attributed to temporary factors such as a jump in oil prices and the impact from Japan's massive earthquake in March, signals of a pickup have so far been elusive.

Economists say the economy could face a further drag from the budget deficit cutting plan approved by Congress this week, although cuts in spending will be phased in gradually.

The Institute for Supply Management said its services sector index fell to 52.7 last month from 53.3 in June. The reading fell shy of economists' forecasts for 53.6, according to a Reuters survey, though it was still above the 50 figure that indicates expansion in the sector.

The new orders gauge slipped to 51.7 from 53.6, while employment fell to 52.5 from 54.1.   Continued...

<p>A job seeker walks the floor at a large career fair at Rutgers University in New Brunswick, New Jersey, January 6, 2011. REUTERS/Mike Segar</p>