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Joahob





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PostPosted: Wed Apr 04, 2007 3:51 pm    Post subject: U.S. Economy: Services Expansion Unexpectedly Slows Reply with quote

U.S. Economy: Services Expansion Unexpectedly Slows

By Shobhana Chandra

April 4 (Bloomberg) -- U.S. service industries grew at the slowest pace in almost four years in March, leaving the economy more exposed to slumps in manufacturing and housing.

The Institute for Supply Management's index of non- manufacturing businesses including banks, builders and retailers slid to 52.4, lower than economists anticipated. Orders placed with American factories rose 1 percent in February, the Commerce Department said in Washington, also less than analysts predicted.

Services, which account for 90 percent of the economy and have propped up growth for the past year, are now being hurt by rising fuel costs and slowing sales. Bonds rallied and the dollar retreated after the numbers

``We're in a very uncomfortable place right now,'' said Cary Leahey, senior economist at Decision Economics Inc. in New York. ``Not only are things more uncertain, but the risks of slower growth have gone up.''

Climbing costs also make it tough for the Federal Reserve to respond to weakness in the economy by cutting interest rates. Traders' attention will now shift to the Labor Department's monthly jobs report on April 6, which economists predict will show a pick up in employment.

The yield on the benchmark 10-year Treasury note fell to 4.65 percent at 3:13 p.m. in New York, from 4.67 percent late yesterday.

...

Mounting defaults on subprime mortgages, loans to people with limited or poor credit histories, may throw more properties onto the market and weaken prices further, economists said. Since the start of 2006, more than 30 lenders have halted operations, gone bankrupt or sought buyers as defaults on subprime mortgages surged last year.

New Century Financial Corp. this week became the biggest subprime mortgage company to go bankrupt after the lender was overwhelmed by customer defaults. The Irvine, California-based company filed for Chapter 11 protection on April 2.

So far, consumer spending is holding up. Both incomes and spending in February gained 0.6 percent, more than forecast, Commerce Department data showed last week. Consumer spending accounts for more than two-thirds of the economy.

http://www.bloomberg.com/apps/.....refer=home
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U.S. Economy: Services Expansion Unexpectedly Slows

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