Service sector of economy grows at slower-than-expected rate in February

(AP) The nation's service sector expanded at a slower-than-expected rate in February amid a slowdown in new orders that economists think may help cool inflation.

The Institute for Supply Management, which is based in Tempe, Ariz., said on Monday that its index of business activity in the service sector was 54.3, down from 59.0 in January. Wall Street analysts had expected a reading of at least 57.0 for the latest month.

A reading above 50 indicates expansion, while one below that indicates contraction.

February marked the 47th consecutive month of business activity growth, the trade group said.

"Members' comments in February are mixed concerning current business conditions. The overall indication in February is continued economic growth in the non-manufacturing sector, but at a slower pace than in January," said Anthony Nieves, head of ISM's survey committee.

The service industries covered by the ISM report represent about 80 percent of the nation's economic activity, and economists are looking for the sector to be a driver of growth in 2007 as the manufacturing sector struggles with weakness in the automotive and housing industries.

The data gave investors little to be excited about, although Mark Vitner, senior economist with Wachovia Securities in Charlotte, N.C., said the moderate growth may help put the brakes on inflation. He noted that the weakening of new orders in February _ to 54.8 from 55.4 in January _ indicates businesses are being conservative as growth slows.

Prices moderated to 53.8 in February, from 55.2 in January.

At the same time, however, the employment index strengthened to 52.2, up from 51.7 the month before.

In early afternoon trading, the Dow Jones industrial average was up 31.16, or 0.26 percent, at 12,145.26. The Standard & Poor's 500 index was off 0.54, or 0.04 percent, at 1,386.63, and the Nasdaq composite index fell 41.83, or 0.47 percent, to 8,916.14.

The nine industries reporting growth in February were; health care; professional, scientific and technical services; educational services; utilities; transportation; real estate; accommodation and food services; and information.

The other nine industries reported decreased activity from January to February. Those were mining; agriculture, forestry, fishing and hunting; arts and entertainment; construction; retail trade; management and support services; public administration; finance and insurance; and wholesale trade.

Vitner said he had been expecting a slightly stronger reading from this morning's report.

"It's not weak by any means _ half the industries are expanding. But the trend is that growth has been moderating," he said.