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Katrina Socks U.S. Service Sector

The U.S. economy's services sector took a hit in September from Hurricane Katrina and surging energy prices, the Institute for Supply Management said Oct. 5. The ISM services or nonmanufacturing index tumbled to 53.3% from 65.0% in August, falling to its lowest level since April 2003.

Readings over 50% indicate expansion in that part of the economy, so the latest report means a more sluggish pace of growth in services, which represents the lion's share of U.S. economic output. The figure was below the 60.0% expected on Wall Street.

Still, the report showed expansion for the 30th consecutive month, said ISM survey chief Ralph Kauffman. "Business activity increased at a slower rate in September than in August," he noted. "Many members' comments expressed concern about the continuing increase in oil and gas prices as well as Hurricane Katrina, and their impact on prices and economic activity."

More On Hurricane Katrina

See IndustryWeek's Hurricane Katrina News & Resources section for more on coverage and how companies are responding.
Eight of 17 non-manufacturing industry sectors reported increased activity in September compared with 13 that reported increased activity in August.

Robert Brusca at FAO Economics said the report was "not really surprising since you can't pile up orders for many services or send orders out-of-area as you can for manufacturing." Nonetheless, he said the ISM data "probably understates the extent of the damage in new Orleans and Mississippi" from Katrina.

Copyright Agence France-Presse, 2005

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