WASHINGTON – U.S. service sector firms grew in November at the weakest pace since June, evidence that cautious spending by consumers and businesses may be slowing growth.
The Institute for Supply Management said Wednesday its service-sector index fell to 53.9 in November, down from 55.4 in October. Any reading above 50 indicates expansion. The index hit an eight-year high of 58.6 in August.
A measure of sales fell sharply last month to 55.5 from 59.7. While that is still above 50, the decline suggests consumers were more reluctant to spend than they were earlier this year. The sales figure reached 62.2 in August.
And a gauge of hiring fell to the lowest level since May. That’s a sign job gains may have slowed in November. The government will report last month’s hiring figures on Friday.
Economists weren’t overly concerned by the declines. They noted that the level of the index still points to steady growth. The government’s report on gross domestic product, the broadest measure of goods and services, will be released today.
“The fall … is a bit disappointing, but the survey is still consistent with decent GDP and jobs growth in the fourth quarter,” said Paul Dales, an economist at Capital Economics.
Eleven of the 17 industries tracked by the survey expanded last month, including transportation and warehousing, retail, and finance. Six contracted, including mining, restaurants and hotels and construction.
Growth in the service industry has been steady this year. The ISM’s index has averaged 55 over the past 12 months.
The survey covers businesses that employ 90 percent of the workforce, including retail, construction, health care and financial services firms. Nearly 86 percent of job gains in the past three months have been in the service sector.
Many of those jobs created have been in lower-paying industries, such as retail, restaurants and hotels. That’s a big reason that workers’ paychecks have barely kept ahead of inflation.
Consumers’ spending drives nearly 70 percent of economic activity and typically has a large influence on the ISM’s services index. Recent reports on spending have painted a mixed picture.
In other reports Wednesday:
• Federal Reserve survey shows the U.S. economy held steady during the 16-day partial government shutdown, growing moderately in most regions from October through late November. The Fed says seven of its 12 banking districts described growth as moderate.
• Americans ramped up purchases of new homes in October after three months of soft sales, evidence that the housing recovery is improving fitfully.
Sales of new homes grew 25.4 percent to a seasonally adjusted annual rate of 444,000, the Commerce Department said Wednesday. That was the largest monthly percentage increase since May 1980.
But the increase came after sales had fallen 6.6 percent in September to a 354,000 annual rate, the weakest since April 2012. And sales in August and July were revised lower to 379,000 and 373,000, respectively.
New-homes sales have risen 21.6 percent higher for the 12 months ending in October. Still, the pace remains well below the 700,000 consistent with a healthy market.