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U.S. Service Sector Expands At Slower Rate In June

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Activity in the U.S. service sector grew at a slower rate in the month of June, according to a report released by the Institute for Supply Management on Wednesday, with the index of activity in the sector falling by more than economists had anticipated.

The ISM said its non-manufacturing index fell to 53.3 in June from 54.6 in May, although a reading above 50 indicates continued growth in the service sector. Economists had been expecting the index to edge down to a reading of 54.0.

Anthony Nieves, chair of the ISM Non-Manufacturing Business Survey Committee, said, "According to the NMI, 15 non-manufacturing industries reported growth in June."

"Respondents' comments are mixed about the business climate and vary by industry and company," he added. "The most prominent concern remains about the volatility of prices."

A notable slowdown in the pace of new orders growth contributed to slower growth in the sector, with the new orders index falling to 53.6 in June from 56.8 in May.

The business activity index also slipped to 53.4 in June from 53.6 in May, while the inventories index fell to 53.5 from 55.0.

The report also showed a notable decrease by the prices index, which fell to 60.9 in June from 69.6 in May, suggesting a slowdown in the pace of price growth. With the decrease, the index fell to its lowest level since August of 2010.

On the other hand, the report showed that the employment index inched up to 54.1 in June from 54.0 in May, indicating a slight acceleration in the pace of job growth in the service sector.

Chris Low, chief economist with FTN Financial said, "The small bounce in the non-mfg ISM in May was seen by many as the beginning of the end of the slowdown in the economy."

"The small decline in June is a reminder that while the economy may be stabilizing at a slower rate of growth, there is little evidence of reacceleration," he added.

Last Friday, the ISM said activity in the U.S. manufacturing sector unexpectedly expanded at a faster rate in the month of June.

The index of activity in the manufacturing sector rose to 55.3 in June from 53.5 in May, with a reading above 50 indicating growth in the sector. The increase came as a surprise to economists, who had expected the index to dip to a reading of 52.0.

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