Services Industries in U.S. Unexpectedly Contract (Update3)

By Bob Willis

Dec. 3 (Bloomberg) -- Service industries in the U.S. unexpectedly contracted in November as companies lost confidence the recovery will gather strength.

The Institute for Supply Management’s index of non- manufacturing businesses that make up almost 90 percent of the economy fell to 48.7 from 50.6 in October, according to the Tempe, Arizona-based group. Fifty is the dividing line between expansion and contraction. The group’s measure of views on business activity dropped to the lowest level in four months.

Job losses are making it difficult for consumer spending to gain traction, indicating the recovery will be slow to develop entering 2010. The lack of spending, which accounts for about 70 percent of growth, and unemployment above 10 percent are reasons why Federal Reserve policy makers have repeated pledges to keep their key interest rate near zero for an “extended period.â€