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US services sector contracts

WASHINGTON, Aug 5 – The ailing US services sector contracted unexpectedly in July after moving closer to growth in the prior three months, a survey showed Wednesday.

The Institute of Supply Management said its index of the non-manufacturing sector fell to 46.4 percent in July from 47.0 percent in June, the 10th consecutive monthly decline as the economy grapples with a long and brutal recession.

The index on activity in the huge services sector that dominates the world\’s largest economy had climbed toward the 50 percent breakeven point between growth and contraction for the past three months.

The July contraction surprised most analysts who had expected the index would rise again, to 48.0 percent.

The decline was broad based across the index\’s components. Business activity slumped to 46.1 percent in July from 49.8 percent in the preceding month.

New orders fell for the 10th month running, to 48.1 percent from 48.6 percent.

And employment activity in the massive sector dropped for the 18th time in the past 19 months, the report showed. The employment index fell to 41.5 percent from 43.4 percent.

The services sector employs more than 85 percent of non-manufacturing workers in the US.

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