Service Sector Growth Eases

The nation’s service sector grew in November, but at a less-robust pace than in October and slightly slower than analysts had expected, the Institute for Supply Management said Monday.

The Tempe, Ariz., group said its index of non-manufacturing activity dropped to 58.5 in November from 60 the month before. Analysts had expected a reading of 59 for November.

Readings of 50 or higher indicate growth, while numbers below that indicate contraction. The index reading has averaged 60.5 over the last year, the institute said, but it fell as low as 53.3 in September when businesses were grappling with the jump in oil prices after Hurricane Katrina.

The November growth marked the 32nd consecutive monthly expansion in the services sector of the economy.

Scott Brown, chief economist with Raymond James & Associates in St. Petersburg, Fla., said of November’s report: “The headline number was less than expected, but the details were still pretty strong.”

He said that the strength in new orders and employment “is consistent with continued economic growth and further Fed tightening.” The Federal Reserve has raised its key rate 12 times since June 2004 to its current level of 4% in an effort to keep a lid on inflation. The Fed’s next meeting is Dec. 13, when another rate increase is expected.

Ralph G. Kauffman, chairman of the institute’s survey committee, said in a statement that business activity and order backlogs increased at slower rates in November than in October, while new orders and employment increased at faster rates.

He said that comments from purchasing and supply agents, who are surveyed each month, were “generally positive.”

But, he added, “there is still significant concern about the relatively high level of energy prices and its impact on freight costs and on the prices of other materials and services.”

The group’s index for companies’ backlog of orders eased to 54 in November from 55 in October, while the index for prices fell to 74.2 in November from 78 the previous month.

Among the categories showing expansion were new orders, up to 59.5 in November from 58.2 the month before, and employment, up to 57 from 52.9.