U.S. service sector still sluggish

Data released Wednesday on growth in the U.S. service sector came in below expectations.

The Institute for Supply Management said its index for service companies dipped to 53.3 in June from 54.6 in May. Any reading above 50 indicates expansion, but economists had expected a reading of 53.7.

The number is closely watched because the service industry employs nearly 90 per cent of the country's work force.

The latest reading showed that the U.S. expanded for a nineteen straight month but slowed compared with May, a sign that the economy remains sluggish.

The index measures activity over a range of industries, from retail and health care to financial services and construction.

It rose to a five-year peak of 59.7 in February, but has since retreated.

High gas and food prices have left consumers with less money to spend on discretionary goods, such as vacations, appliances and furniture. That has hurt retailers, restaurants and hotels. The index fell to 52.8 in April, the lowest reading since August.

Gas prices have declined to about $3.56 US an American gallon since peaking in early May at a national average of nearly $4. That should make it easier for consumers to spend more on other goods.

The ISM numbers came two days ahead of the U.S. government report on job creation. Most economists expect the economy added only 90,000 jobs and the unemployment rate was unchanged at 9.1 per cent.