Growth in the U.S. economy's service sector slowed considerably in June, surprising analysts and indicating that higher interest rates might finally be taking effect, according to a monthly survey of supply managers released Thursday. The service sector, which is made up of industries like banking, construction, retailing and travel, and comprises nearly two-thirds of overall U.S. economic activity, expanded for the 39th consecutive month in June. The Institute for Supply Management (ISM) reported that its index of activity in the service sector stood at 57 in June—lower than analysts' expectations of 59, and also lower than May's reading of 60.1. A reading of 50 or more indicates growth in the sector. Despite the slower growth, ISM found that strength in the service sector was broad, with 14 of the 16 industry groups in the non-manufacturing sector reporting expansion. Only energy costs and prices for raw materials appeared problematic. Wall Street reacted positively to the news, sending the Dow Jones into near triple-digit gains on the hopes that the Federal Reserve will soon stop raising interest rates.
