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Ahead of the Bell: US services index

October 5, 2016

WASHINGTON (AP) — The Institute for Supply Management reports on the September performance of U.S. services firms at 10 a.m. Eastern Wednesday.

REBOUND LIKELY: Economists believe the ISM services index will rebound to 53 after dropping to 51.4 in August, lowest since February 2010. Any reading above 50 signals that services firms are expanding. In August, new orders and hiring grew more slowly, and export orders fell.

The ISM is a trade group of purchasing managers. Its services survey covers businesses that employ the vast majority of workers, including retail, construction, health care and financial companies.

SOURCE OF STRENGTH: Services firms have been a source of strength in a lackluster economy. Despite the August hiccup, they have expanded for 79 straight months.

Overall, the American economy has been struggling since late last year, growing at an annual pace of just 1.4 percent from April through June after eking out gains of 0.8 percent the first three months of 2016 and 0.9 percent in the fourth quarter of 2015. Business investment has dropped three straight quarters, pulled down by cutbacks in the energy industry.

The job market has been stronger: Employers have added 204,000 jobs a month the past year, and unemployment is at 4.9 percent. The solid labor market is supporting healthy consumer spending, which expanded at a 4.3 percent annual rate from April through June, fastest pace since the end of 2014.

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