Service sector seen weakest in 17 months

Service businesses such as restaurants, hotels and financial companies in July experienced their weakest growth in 17 months.

The report released Wednesday by the Institute for Supply Management confirms other data that show the U.S. economy continues to struggle two years after the recession ended.

The trade group of purchasing executives said its index for services companies fell to 52.7 from 53.3 in June. Any reading above 50 indicates expansion.

A slumping service sector put Wall Street on track for another wild day of trading, with the Dow Jones industrial average falling more than 150 points before a late rally ended an eight-day losing streak. The ISM index covers 90 percent of the workforce. It reached a five-year high of 59.7 in February but has fallen since. The July reading was the lowest since February 2010.

New orders to service companies, an indication of future business, increased but at the slowest pace since August 2009, according to the ISM report. Services firms are still hiring more workers, the report said. But employment growth dipped in July.

The report "suggests that the economy is not slipping into a recession but instead that growth is very weak," said Paul Dales, an economist at Capital Economics.

It follows dismal economic news: Growth slowed in the first six months of the year; consumer spending, the catalyst for 70 percent of economic activity, was down in June; and manufacturers reported their weakest growth in two years last month.

Hiring also has slumped, and the Labor Department said Wednesday that unemployment rates rose in more than 90 percent of U.S. cities in June. The government will release the July jobs report Friday, and economists expect the jobless rate to remain unchanged.