Economy Service firms expand at slowest pace in 17 months

WASHINGTON (AP) -- The U.S. service firms, which employ nearly 90 percent of the country's work force, experienced their weakest growth in 17 months in July. The report confirms other data that show the economy is struggling two years after the recession ended.

The Institute for Supply Management said Wednesday its index for services companies fell to 52.7, from 53.3 in June. Any reading above 50 indicates expansion.

The ISM's index covers a range of service industries, including health care, retail, and financial services. The index reached a five-year high of 59.7 in February, but has fallen since then.

Growth slowed to less than 1 percent in the first six months of this year, the government said Friday. Consumer spending fell 0.2 percent in June. It was the first decline since September 2009.

Less spending has hurt service-sector companies such as restaurants, retailers, and amusement parks.

As the economy has slowed, so has hiring. Employers added only 18,000 jobs in June, the fewest in nine months. The government will release the July jobs report Friday. Economists predict only 90,000 jobs were added last month and the unemployment rate was unchanged.

Spending fell largely because most Americans aren't seeing any pay increases. Incomes rose only 0.1 percent in June, the department said, the smallest gain since September. Americans are also saving more, boosting the savings rate to 5.4 percent.

Published: Thu, Aug 4, 2011