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Ahead of the Bell: US services index

October 5, 2015 GMT

WASHINGTON (AP) — The Institute for Supply Management reports on September growth at U.S. service firms at 10 a.m. Eastern.

SLOWDOWN LIKELY: Economists believe that the ISM index fell to 57.5 in September from 59 in August, according to a survey by FactSet. That would be the second straight drop, after the index reached a 10-year high in July of 60.3.

Any reading over 50 shows that services firms are expanding.

The ISM is a trade group of purchasing managers. Its services survey covers businesses that employ 90 percent of workers, including retail, construction, health care and financial services companies.

ECONOMY SLOWING?: Steady hiring in the past three years has added 8 million jobs to the U.S. economy, boosting Americans’ ability to spend. Consumers have shopped more, spent more money at restaurants and taken more vacations.

That has boosted economic growth this spring and summer. The two highest readings of the ISM’s services index were in July and August.

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Yet at the same time, weak economies overseas and the strong dollar have hammered U.S. exports of manufactured goods. Factory growth stumbled and the Institute’s manufacturing index has been weak all year. It dropped to just 50.2 in September, the ISM said last week.

There are now signs the global growth slowdown is taking a toll on the U.S. economy. Hiring slowed sharply in August and September and employers added an average of just 167,000 jobs a month in the July-September period. That’s down from an average of 231,000 in the previous three months.

The unemployment rate stayed at 5.1 percent.

Much of the weakness in the jobs report was concentrated outside the service sector. Manufacturers shed jobs for the second straight month, and mining, which includes oil and gas drilling, cut 10,000 jobs.

Services firms mostly did better: retailers added nearly 24,000 jobs and hotels and restaurants hired at a healthy clip. But there were some weak spots. Financial services employment didn’t change, and education and health care hiring fell to half its recent pace.

Sharply lower exports will likely slow growth in the July-September quarter to as low as a 1.5 percent annual pace, economists expect. That would be down from a 3.9 percent rate in the second quarter.