U.S. Services Sector Unexpectedly Shrinks

The U.S. services sector, the bulk of the world's largest economy, contracted in November after two months of growth amid a budding recovery from recession, a private survey showed Thursday.

December 4, 2009

WASHINGTON — The U.S. services sector, the bulk of the world's largest economy, contracted in November after two months of growth amid a budding recovery from recession, a private survey showed Thursday.

The Institute of Supply Management said its non-manufacturing index dropped to 48.7 percent last month, 1.9 percentage points lower than the 50.6 percent reading in October.

The fall in the ISM index below 50.0 percent, indicating contraction, surprised analysts, who had forecast on average an increase to 51.5 percent in the non-manufacturing sector, which makes up more than 85 percent of the US economy.

"Respondents' comments remain cautious about business conditions and reflect concern over the length of time for economic recovery," said Anthony Nieves, chair of the ISM's services survey committee and a senior vice president for Hilton Worldwide.

The business activity sub-index tumbled 5.6 percentage points to 49.6 percent, reflecting contraction after three months of growth.

The new orders sub-index slipped 0.5 percentage point to 55.1 percent, indicating growth, while the employment sub-index increased a half point to 41.6 percent but remained stuck in contraction.