New York — Activity in the service sector of the U.S. economy slowed moderately in September from the previous month's pace, but it still expanded at a healthy clip, according to a private research group's survey.
The Institute for Supply Management's September nonmanufacturing index fell to 56.7 from the prior month's 58.2 reading.
The index is comprised mostly of services, which account for two-thirds of U.S. economic activity. Readings above 50 indicate expansion of activity and prices in the sector, while readings under 50 denote contraction. September marks the 18th consecutive month of expansion.
Economists polled by Dow Jones Newswires and financial-news channel CNBC-TV had expected a reading of 59.0.
The employment index increased to 54.6 from the 52.5 reported in August.
This gauge, in conjunction with the jobs index included in the ISM manufacturing report, is closely watched by economists who use it to help refine their forecasts for the Labor Department's monthly employment report.
The ISM manufacturing jobs index, released last week, moved to 58.1 from the 55.7 reading seen in August. The current consensus forecast for September nonfarm payroll growth is 145,000 jobs.
Ralph Kauffman, chair of the ISM nonmanufacturing business survey committee, said in a telephone conference with reporters that the “employment gain was encouraging,” with the index now at its third-highest reading ever.
“Managements are not anticipating a drop off in business, rather they expect growth, but seem to be hiring temporary workers rather than committing to permanent hires,” Kauffman said.
Also in Tuesday's report, the new-orders index held relatively steady at 58.5 from the 58.6 posted in August. Inflation pressures moderated slightly, with the prices index falling to 67.1 from 70.0 in the prior month.
The data paint a mixed picture on the economic outlook, noted economists at ING Financial Markets. While the headline index still reflects solid growth in the sector, they noted that it “continues the downward trend seen through the year.”
But the increase in the employment gauge confers an optimistic tone to the report, they said.
“It bodes well for Friday's payrolls figure, although the Hurricane effect makes things difficult to judge accurately. Nonetheless, we believe that the market may be a little too cautious in expecting a rise of just 150,000,” they said in a note to clients.
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