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U.S. Service Sector Growth Slows For Second Consecutive Month

(Photo: Reuters)

Wall Street slumped on news the U.S. service sector growth slowed for a second straight month in December, with the pace of business activity expanding at a lower rate and new orders contracting.

The Institute for Supply Management said its services index fell to 53 last month from 53.9 in November, which also represented a slowing in the service economy. The service sector index reading was below expectations for a reading of 54.5, according to a Reuters survey of economists, and the lowest reading for the index since June 2013.

An index reading above 50 indicated an expansion, which the month of December marked the 48th straight month of growth in the services sector, despite the slow down. But most of the report points to a cause for some concern.

The gauge of business activity also dropped to 55.2 from 55.5, which was the weakest reading for the sub index since September and below economists’ expectations the reading would measure in at 56.5.

The measurement for new orders shows contraction for the first time since the month of July in 2009, as it disappointingly fell below the 50 threshold. New orders dropped to 49.4 in December from 56.4 the month prior, which is the lowest reading for new orders since the month of May in 2009.

On a positive note, the employment gauge rose to 55.8 from 52.5 in November, duplicating the employment indexes for both Gallup and Rasmussen tracking. While U.S. economic confidence is still rising modestly, the index is negative, according to Gallup.

In other economic news, the Commerce Department reported Monday orders at U.S. factories grew 1.8 percent in November, matching Wall Street’s expectations. The gauge is a lagging economic indicator, but it offers analysts a peek into the American manufacturing sector.

Also on the economic front, Janet Yellen’s confirmation hearing will be held in the Senate. The Federal Reserve vice chair is expected to be cleared, and is posed to replace chairman Ben Bernanke next month. Yellen is a proponent of easy money, and likely to continue Bernanke’s aggressive monetary, inflation-inducing policies.

The news is good for investors, but bad for the American saver.

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