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Ahead of the Bell: US Services Index

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November 5, 2013 06:09 AM EST | AP

WASHINGTON (AP) — The Institute for Supply Management reports on growth at U.S. services firms in October. The ISM will release its services index at 10 a.m. EDT Tuesday.

SMALL DECLINE: Economists forecast the index declined slightly to 54 in October, according to a survey by FactSet, from 54.4 in September. The index reached an eight-year high of 58.6 in August. Any reading above 50 indicates growth. The ISM is a trade group of purchasing managers.

STEADY GAINS: Services firms have expanded at a steady but unspectacular pace for most of the year. A reading of 54 would be just below the 12-month average of 55.

Last month, a measure of sales fell sharply though it remained in expansionary territory. A gauge of new orders slipped, but stayed near the 2 ½-year high it reached in August. Healthy new orders suggest that business activity could remain solid in September.

CAUTIOUS CONSUMERS: The survey covers businesses that employ 90 percent of the workforce, including retail, construction, health care and financial services firms.

The survey partly reflects consumers' willingness to spend. Other recent reports suggests Americans are spending, but at a cautious pace. Unemployment is at a still-high 7.2 percent and workers are seeing only meager increases in pay.

Sales at retail stores, auto dealers and restaurants dipped 0.1 percent in September, mostly because auto sales fell 2.2 percent. But excluding the volatile categories of autos, gas and building supplies, sales rose 0.5 percent, up from 0.2 percent in August.

Consumer spending on services, particularly utilities, has been weak. Most economists forecast that consumer spending slowed in the July-September quarter compared to the April-June quarter.

The partial government shutdown may impact the report because it also covers public administration. But the shutdown had little impact on the ISM's manufacturing index, which ticked up to 56.4 in October from 56.2 in September. October's reading was a 2 ½ year high.

Growth likely slowed in the July-September quarter to an annual rate of about 2 percent, economists forecast, down from 2.5 percent in the April-June quarter. Some economists believe it may pick up a bit in the final three months of the year.

The government will issue its first estimate of the economy's third quarter growth on Thursday.