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This Week's Economic Roundup

Higher costs hit service sector; 14 of 16 major industries report strong activity.
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The recent slowdown in economic growth hit the service sector in June, while gains in factory orders and the housing market may signal better times ahead. Here's a look at this week's economic developments and how they may impact your business.

Service Sector Declines

Higher costs and fewer orders slowed growth in the service sector in June, the Institute of Supply Management reported Thursday.

Based on a survey of purchasing managers at 370 businesses nationwide, the ISM non-manufacturing index slipped to 57 in June, down from 60.1 the previous month, the report said. Readings above 50 indicate growth.  

New orders, employment, inventories, and prices also fell, according to the survey.

Despite the slower pace, 14 of 16 industries reported strong business activity, including transportation, business services, mining, retail, construction, communication, and banking, among others. The entertainment sector remained unchanged, while the agriculture sector was the only one to report a downturn, the report said.

"The overall indication in June is continued economic growth in the non-manufacturing sector, however, at a slower pace than in May," Anthony Nieves, chairman of the ISM, said in a statement.

The service sector, which accounts for about 80% of the U.S. economy, has grown for 39 months straight, Nieves said.

Still, the nation's manufacturers also saw a slowdown in June, with the ISM manufacturing index falling to 53.8% in June from 54.4 in May, the group said in a separate report on Monday.

While new orders were up at factories and manufacturers -- hinting at increased activity in the months ahead -- prices paid dropped to 76.7% from 77%, the report said.

Housing Sales Increase

Pending home sales were stronger the expected in May, the National Association of Realtors reported on Thursday.

Sales of existing homes, based on contracts signed in May, increased by 1.3% over April, though still 10.1% below May 2005, the group said. Pending sales are typically finalized within a month or two of signing, the group said.

According to David Lereah, the NAR's chief economist, the slight uptick shows the housing market is starting to level out following sharp declines earlier this year.

"This is consistent with our forecast, which is showing a soft landing for the housing sector," Lereah said in a statement.

Still, over the same period, construction spending dropped by 0.4%, the sharpest decline since September 2004, the Commerce Department reported Monday.

In the private sector alone, spending on residential projects in May fell by 0.8% to $651.2 billion, while spending on non-residential projects fell by 0.3% to $288.2 billion, the report said.

Jobless Claim Dip

New jobless claims fell by 2,000 to 313,000 in the week ending July 1, the Labor Department reported Thursday.

The highest number of new claims were in North Carolina, New Jersey, Massachusetts, Connecticut, and Missouri, the report said.




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