The U.S. service sector grew in May for a second consecutive month but at a slower pace than in April, suggesting that higher prices for energy and food may be hurting the retail, entertainment, and agriculture industries, according to a report released Wednesday that showed a worrying surge in inflation pressures. The Institute for Supply Management (ISM) said Wednesday that its non-manufacturing index was 51.7 in May compared to 52.0 in April. A reading above 50 reflects that the massive service sector is growing, while a reading below 50 indicates contraction. The report's inflation gauge—the prices-paid index—rose to 77.0 in May, the second-highest reading in the report's 11-year history. It was up from 72.1 in April. Wednesday's report supports inflation concerns expressed Tuesday by Federal Reserve (Fed) Chairman Ben Bernanke and suggests that the U.S. central bank may need to change its focus from avoiding recession to fighting high inflation. The service sector represents about 80 percent of U.S. economic activity, including businesses such as banks, hotels, restaurants, and airlines.
