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U.S. Non-Manufacturing Index Drops More Than Expected In January

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Activity in the U.S. service sector grew at a slower rate in the month of January, according to a report released by the Institute for Supply Management on Tuesday.

The ISM said its non-manufacturing index fell to 56.7 in January from an upwardly revised 58.0 in December, although a reading above 50 still indicates growth in the service sector.

Economists had expected the non-manufacturing index to dip to 57.1 from the 57.6 originally reported for the previous month.

With the bigger than expected decrease, the index dropped to its lowest level since a matching reading in July of last year.

New order growth showed a significant slowdown compared to the previous month, with the new orders index slumping to 57.7 in January from 62.7 in December.

The business activity index also fell to 59.7 in January from 61.2 in December, while the employment index rose to 57.8 from 56.6.

On the inflation front, the report said the prices index climbed to 59.4 in January from 58.0 in December, indicating prices increased for the 20th consecutive month.

"Respondents are concerned about the impacts of the government shutdown but remain mostly optimistic about overall business conditions," said Anthony Nieves, Chair of the ISM Non-Manufacturing Business Survey Committee.

Last Friday, the ISM released a separate report showing growth in U.S. manufacturing activity unexpectedly reaccelerated in the month of January.

The ISM said its purchasing managers index climbed to 56.6 in January from a revised 54.3 in December, with a reading above 50 indicating growth in the manufacturing sector.

Economists had expected the manufacturing index to edge down to 54.0 from 54.1 originally reported for the previous month.

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