ISM Services Index In US Slows To 30-Month Low In June

By Moran Zhang | July 05 2012 10:54 AM

The Institute for Supply Management said its services sector index, which covers about 90 percent of the economy, dropped to 52.1 in June from the prior month's 53.7 to mark the worst reading since January 2010.

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Economists polled by Reuters had projected a reading of 53. A reading above 50 indicates expansion in the sector.

Clearly, the economy is losing momentum, with the export-exposed industrial sector suffering most, Paul Dales, senior U.S. economist for Capital Economics, wrote in a note.

The new orders component slipped to 53.3 in June from 55.5 in May, and inventories fell from 56 to 53. The employment measure, however, rose to 52.3 from 50.8.

The figures follow July 2 data that showed manufacturing in the U.S. shrank for the first time in almost three years, hurt by a global slowdown. The ISM manufacturing index fell to 49.7 in June from 53.5 a month earlier.

Dales said results from the two ISM surveys are consistent with annualized gross domestic product (GDP) growth slowing from 1.9 percent in the first quarter to around 1 percent in the second quarter.

While such a result indicates the U.S. economy might only grow by less than 2 percent in 2012, according to Dales, some comfort can be taken from the fact that the most reliable leading indicators do not suggest that a recession is around the corner.