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Business News

Slowing services sector dents US recovery hopes

The recovery prospects of the US economy dimmed a little last night after new data pointed to a moderation in the pace of growth in the dominant services sector.

The Institute for Supply Management's widely followed gauge of activity in the services sector fell from 55.4 for May to 53.8 for June. Though still above the key 50-point mark dividing growth from contraction, the reading was below forecasts, and follows a similarly sluggish report on the manufacturing sector.

Moreover, while the June reading was well above the low point of 37.2 struck during November 2008, it remained clear of the 2004 pre-slump high of 67.7.

The figures were supplemented by some grim data from the US jobs market. The employment component of the ISM index fell from 50.4 in May to 49.7 in June, indicating contraction in hiring across the services sector.

The industry group's report followed recent figures from the US Labour Department, which showed a modest but below-forecast increase in private- sector payrolls last month.

The Labour Department statistics also showed that overall employment in June fell for the first time this year as thousands of temporary jobs in the census office came to an end.

Julia Coronado, a senior economist at BNP Paribas in New York, said the ISM document, though not a "falling-off-the-cliff report", was still "disappointing because we are at a fairly delicate stage of the recovery",

The sentiment was echoed by Peter Jankovskis, of Oakbrook Investments in Illinois, who highlighted the weak hiring figures, saying: "I would describe it as pretty disappointing across the board. Right now the labour market... is everybody's focus."