US services sector activity growth slows in October: Markit

An employee helps a guest at the Waldorf Astoria in New York City.
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An employee helps a guest at the Waldorf Astoria in New York City.

The pace of growth in the U.S. services sector slowed more than previously estimated in October from a month earlier, hitting its lowest level in six months and pointing to a year-end slowdown in economic growth, a survey showed on Wednesday.

The final services sector Purchasing Managers Index compiled by information services company Markit slipped to 57.1 in October from 58.9 in September, hitting its lowest rate since April. Markit had initially estimated the index at 57.3 in its preliminary, or "flash," reading released in late October.

A reading above 50 signals expansion in economic activity.

Markit's final composite PMI, a weighted average of its manufacturing and services indexes, dipped to 57.2 in October from 59.0 in September. It was initially estimated at 57.4.

Taken together with Markit's manufacturing activity survey for October, which fell to a three-month low, the data suggests the brisk U.S. economic growth rate of the previous two quarters will not be sustained in the fourth quarter, according to Markit's top economist.

"The PMI surveys warn of a slowdown as we move towards the end of the year," Markit Chief Economist Chris Williamson said.

"The October survey data is running at a level consistent with (grossdomestic product) rising at an annualized rate of 2.5 percent at the start of the fourth quarter, but any further drop in the PMI numbers raises the risk of an even sharper slowdown."

The U.S. economy grew at an annual rate of 3.5 percent in the third quarter, according to the Commerce Department's advance reading of GDP released last week. Following a contraction of 2.9 percent in the first quarter, the economy had rebounded sharply in the ensuing two quarters, expanding at an average annual rate of 4.05 percent in that period, its fastest clip since the six months ended March 2010.

Markit's new business component slipped to 57.8 in October from 59.4 in September, hitting its lowest in three months, and the employment index also touched a three-month low.