WASHINGTON — Service industries in the U.S. shrank in July for a second straight month as a decline in new orders overshadowed an improvement in employment.
The Institute for Supply Management’s index of nonmanufacturing businesses, which make up almost 90 percent of the economy, rose to 49.5, from 48.2 in June, the Tempe, Ariz.- based group said Tuesday. The reading was higher than forecast though still less than 50, the dividing line between growth and contraction.
“The report overall, especially with forward-looking orders, doesn’t bode well,” Anthony Nieves, chairman of the ISM’s nonmanufacturing survey, said in a conference call with reporters. “We’ll have to see how the impact of fuel affects the next release of numbers we see, but right now, it doesn’t look good with the future.”
Economists forecast the services index, which includes real estate, financial services, utilities and retailers, would rise to 48.8, according to the median of projections in a Bloomberg News survey. Estimates ranged from 47 to 52.5.
The ISM’s employment measure increased to 47.1 from 43.8, which was the lowest reading since records began in July 1997. The Labor Department reported last week that service- industry payrolls declined by 5,000 in July, the first drop since March.
Total employment fell 51,000, the seventh straight monthly loss this year, and the unemployment rate rose to 5.7 percent.
