US services industry, factory data point to slowing growth

Growth in the US services sector slowed more than expected in December and new orders for manufactured goods fell for a fourth straight month in November, signs the economy lost some momentum in the fourth quarter.

The Institute for Supply Management said on Tuesday its services index fell to 56.2 last month, the lowest reading since June, from 59.3 in November. Wall Street had expected the index to only decline to 58 in December.

In a separate report the Commerce Department said new orders for factory goods dropped 0.7 per cent in November after a 0.7 per cent fall in October. Economists had forecast new orders received by factories falling 0.5 per cent.

The economy appears to have slowed in the fourth quarter after expanding at its fastest pace in 11 years in the third quarter. That reflects slowing growth in China and the Euro zone, as well as a recession in Japan, which are crimping demand for US manufactured goods.

In addition, manufacturing activity has also been hampered by a labour dispute at the nation's West Coast ports, which has hit deliveries and curbed inventory accumulation. A survey last Friday showed a manufacturing sector gauge hit a six-month low in December.

But with domestic demand picking up, against the backdrop of lower gasoline prices and firming wage growth, any slowdown in the economy is likely to be temporary.

In November, factory orders excluding the volatile transportation category fell 0.6 per cent as demand declined almost across the board. That followed a 1.5 per cent drop in October.

Inventories edged up 0.1 per cent in November, while shipments fell 0.6 per cent, likely reflecting delays moving goods at the West Coast ports. The inventories-to-shipments ratio was 1.32, unchanged from October.

Unfilled orders at factories rose 0.4 per cent. Order backlogs have increased in 19 of the last 20 months, showing underlying strength in manufacturing.

The Commerce Department also said orders for durable goods, manufactured products expected to last three years or more, fell 0.9 per cent instead of the 0.7 per cent drop reported last month.

Another big drop in the value of shipped petroleum products, reflecting declining crude oil prices, saw non-durable goods orders falling 0.5 per cent in November after dropping 1.6 per cent in October.

Orders for non-defence capital goods excluding aircraft - seen as a measure of business confidence and spending plans - fell 0.5 per cent instead of being flat as previously reported.