U.S. services industry activity slowed for a second straight
month in October, the latest indication the economy has lost some
momentum. Still, the economy remains on solid footing as other data
on Wednesday showed a pick-up in private sector hiring last month.
The Institute for Supply Management said its services index
fell to 57.1 last month from a reading of 58.6 in September, drifting further
from August's post-recession high of 59.6. Nevertheless, the survey showed the
key services sector, which accounts for roughly two-thirds of the economy, remained
solidly in growth mode. A reading above 50 indicates expansion.
Another survey conducted by information services company
Markit also showed services sector growth slowed last month, but stayed in
expansion territory.
Separately, the ADP National Employment Report showed
private payrolls increased by 230,000 in October, for a record seven straight
months of job gains exceeding 200,000. Private hiring had risen 225,000 in
September.
Job gains last month were broad-based, with mid-sized
businesses adding the most workers in more than seven years.
LABOR MARKET TIGHTENING
The employment data helped to lift stocks. Investors were
also cheered by midterm elections that put the Republican Party, considered
more business friendly, in control of both houses of Congress for the first
time since 2006.
The ADP figures come ahead of the Labor Department's more
comprehensive nonfarm payrolls report on Friday, which includes both public and
private sector employment. Payrolls are expected to have increased 231,000 last
month after rising 248,000 in September, according to a Reuters survey of
economists. The unemployment rate is forecast steady at a six-year low of 5.9
percent.
A strengthening labor market is seen tempering some of the
slowdown in growth, which is driven in part by weakening global demand,
especially in China and the euro zone. Data ranging from consumer spending to
trade and business spending suggest the economy exited the third quarter with
less steam, setting it up for a further moderation in the final three months of
the year. Construction spending has also been weak.
Third-quarter gross domestic product was initially estimated
to have expanded at a 3.5 percent annual pace, but the weak trade and
construction data implied growth would be lowered to around a 3 percent rate. Growth
estimates for the fourth-quarter range between a 2.2 percent and 3.0 percent
pace.
Services sector activity last month was restrained by a
sharp slowing in export orders. Measures of supplier deliveries, new orders and
order backlogs also fell. A gauge of services industry employment, however, hit
its highest level since August 2005.
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