Service-oriented U.S. firms grow slower in October, ISM finds

Index drops to 54.8% from 57.1%; employment plans scaled back

U.S. companies grew in October at a mild pace, a reflection of a stable economy.

U.S. companies grew in October at a mild pace, a reflection of a stable economy.

Companies that offer services, such as health care and entertainment grew less rapidly in October and scaled back hiring plans, but executives described business as steady in a sign that the economy is still expanding at a moderate pace.

The Institute for Supply Management said its non-manufacturing index fell to 54.8% last month from 57.1% in September, which marked an 11-month high. Any reading over 50% signals that more businesses are expanding instead of contracting.

Thirteen of the 18 service sectors tracked by the ISM expanded in October, according to a survey of senior executives. One construction executive said business was “booming” and a senior retail manager said “sales remain steady.”

Food makers, grappling with lower prices, and health-care providers fared less well. A health-industry executive said there’s “uncertainty as to the ongoing status of the Affordable Care Act and the impact it is having on individual costs.” Premiums for plans offered under the aegis of the law commonly known as Obamacare have soared for the upcoming year, triggering a fresh bout of angst.
Production and new orders both moderated in October, though each were growing at very health rates. A gauge that measures employment posted the biggest decline, down 4.1 points to 53.1%.

Still, companies in the service sector continue to add workers in a good sign for the economy. About 8 in 10 American workers are employed by service firms.

A related ISM survey that covers manufacturing, meanwhile, rose in October, the nonprofit group reported earlier in the week. Employment rose slightly.

Taken together, the two indexes suggest that employment increased again in the U.S. last month.

The ISM surveys is compiled from a questionnaire of the executives who buy supplies for their companies and it tends to rise and fall in step with the broader economy.



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