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Data on service sector shows struggling recovery

The U.S. economy's service sector grew slightly last month, while the pace of job losses slowed, signaling a recovery still struggling to gain strength.

The Institute for Supply Management said Wednesday its service sector index rose to 50.5 last month, from a downwardly revised 49.8 in December. Economists polled by Thomson Reuters had expected a level of 51. Still, it was the index's strongest reading since May 2008.

Any reading above 50 signals growth. That threshold was broken in September for the first time in 13 months. But the service sector's recovery has been bumpy since, having shrunk in November and December. That's a concern for the broader economic rebound.

"Outside the factory sector, the economy is hardly growing, largely because of continued weakness in construction and lackluster retail activity," Sal Guatieri of BMO Capital Markets said in a note to investors.

With consumers squeezed by job losses and flat wages, the recovery "remains at risk" if government programs that support the housing market end this spring, Guatieri said.

Overseas sales and the restocking of inventories have helped manufacturing grow faster than the service sector. The ISM said Monday its manufacturing index jumped to 58.4 in January - its strongest point since 2004 - from 54.9 in December.

- AP

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