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Jul 3, 10:36 AM EDT

US services sector expands at slower pace in June


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WASHINGTON (AP) -- U.S. services firms expanded again last month but at a slightly slower pace than they did in May. Orders, exports and hiring grew faster in June.

The Institute for Supply Management said Thursday that its service-sector index slipped to 56 last month, down from May's 56.3 reading. Any figure above 50 indicates expansion, however.

The ISM is a trade group of purchasing managers.

The services survey covers businesses that employ 90 percent of the workforce, including retail, construction, health care and financial services firms.

Fourteen of 18 services industries expanded in June, led by construction. "Construction activity was particularly strong," Paul Dales, senior U.S. economist at Capital Economics, wrote in a research note. "This bodes well for the housing recovery, which has languished in recent quarters."

The services index bounced back this spring after sliding to the lowest level in four years in February in the midst of a bitter winter that caused restaurants and stores to close at times across the country.

The economy shrank at an annual pace 2.9 percent from January through March, but most economists blame the slump on temporary factors - the bad weather and a sharp drop in business inventories. The economy has shown signs of strength as the weather warmed. Economists expect growth to rebound to an annual pace of 3 percent or more for the rest of the year, boosted by rising consumer demand and a rebound in U.S. export sales.

Adding to evidence the economy is gaining momentum, the Labor Department reported Thursday that employers added 288,000 jobs last month and unemployment fell to 6.1 percent, lowest since September 2008.

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