ISM's Service Sector Index Grows Again in October

The U.S. service sector grew for a second straight month in October, but at a slower pace than in September, as a broad economic recovery creeps along.

FILE - In this July 30, 2009 photo, patients wait in the emergency room at Cook County Hospital, one...

FILE - In this July 30, 2009 photo, patients wait in the emergency room at Cook County Hospital, one of Chicago's safety net hospitals. The U.S. service sector grew for a second straight month in October, but at a slower pace than in September, as the recovery creeps along for the country's hospitals, retailers, financial services companies and truckers. (AP Photo/Paul Beaty, file)

(AP)

The Institute for Supply Management said Wednesday that its service index dipped to 50.6 last month from 50.9. Any reading above 50 signals growth. Analysts polled by Thomson Reuters had expected a 51.5 for the index that tracks the country's hospitals, retailers, financial services companies and truckers.

But new orders, an augur of future activity, rose to 55.6, from 54.2 in September. Business activity also rose.

Still, the decline in employment worsened. The employment tracker has contracted for 21 of the past 22 months.

Meanwhile, the Federal Reserve pledged Wednesday to keep a key interest rate at a record low for an "extended period," and said economic activity has "continued to pick up" since its last meeting in late September.

But Fed Chairman Ben Bernanke and his colleagues warned that rising joblessness and hard-to-get-credit could hinder the rebound in the months ahead.

In the ISM's survey, nine industries said their businesses grew last month, with real estate, construction, corporate management and support services showing the biggest gains. Seven sectors contracted.

The index tracks more than 80 percent of the country's economic activity.

Last month's dip "may be a sign that the recovery is still struggling to gain any momentum," said Paul Ashworth, senior U.S. economist at Capital Economics in Toronto. He added, though, that a similar slip in July was later reversed and that the new report may "possibly be nothing more than a temporary blip."

On Wall Street, the Dow Jones industrials added about 30 points to 9,802.14. Broader indexes were mixed.

The service sector's recovery has been choppy, unlike manufacturing's sharper move upward as companies restock inventories and demand increases from overseas.