Service Industries in U.S. Probably Grew at Slower Pace

Service industries in the U.S. probably grew in June at a slower pace, a sign the world’s largest economy is struggling to maintain momentum, economists said before a report today. The Institute for Supply Management’s index of non- manufacturing businesses, covering about 90 percent of the economy, fell to 53 from 53.7 in May, according to the median forecast of 63 economists surveyed by Bloomberg News. Readings above 50 signal expansion. Initial jobless claims last week stayed close to the highest level of 2012, other data may show. Companies from Family Dollar Stores Inc. (FDO) to FedEx Corp. (FDX) are seeing waning demand, underscoring concern about Europe’s debt crisis, cooling global markets and an absence of U.S. fiscal policy clarity that’s also hurting manufacturing. Limited hiring and income growth indicate households will be reluctant to step up purchases, which account for about 70 percent of the economy. “The outlook for consumer spending stays pretty soft,” said Ellen Zentner, a senior economist at Nomura Securities International Inc. in New York. “There is slow to no wage growth. Economic growth is still frustratingly slow.” The Tempe, Arizona-based ISM’s non-manufacturing report is due at 10 a.m. Bloomberg survey estimates ranged from 51.5 to 54.2. Fewer Americans than forecast filed first-time claims for unemployment insurance payments last week. Applications for jobless benefits decreased by 14,000 in the week ended June 30 to 374,000, the fewest since mid-May, Labor Department figures showed today. Economists forecast 385,000 claims, according to the median estimate in a Bloomberg News survey. The ISM services survey covers industries that range from utilities and retailing to health care, housing and finance. Manufacturing Decline The report follows July 2 data that showed a slowdown in overseas markets including China is limiting American exports and damping prospects for manufacturers. The ISM factory index fell to 49.7 in June, the first contraction in almost three years and worse than the most-pessimistic forecast in a Bloomberg survey. Sales are also softening in part because of the lack of progress in the labor market. The payrolls tally in June probably crowned the weakest quarter for employment in more than two years, economists in the Bloomberg survey forecast ahead of a Labor Department report due tomorrow. The jobless rate, which has exceeded 8 percent for 40 consecutive months, may have held at 8.2 percent in June. Family Dollar, the owner of more than 7,200 discount shops in the U.S., narrowed its profit forecast for fiscal 2012 after third-quarter sales trailed analysts’ average estimate.