Despite Slowed Growth, Recession Is Doubted

The shriveled housing market was a drag on American business activity last month, with service industries slowing but still showing some growth.

The Institute for Supply Management, a business trade and research group, reported yesterday that its services index registered 54.8 in September. That was down from 55.8 in August and below the 12-month high of 60.7 reached in June, but above 50 — the threshold between expansion and contraction.

The service sector has not had a month of contraction in four and a half years, according to the institute’s monthly reports.

Mark Vitner, a Wachovia economist, commented: “I really think it throws some cold water on the notion that the economy is going to fall out of bed. None of the numbers we’ve seen on the economy point to recession. It points to moderate economic growth.”

The index, now at its lowest point since March, was in line with economists’ estimates.

The service sector makes up a majority of American economic activity, and on Monday the institute reported slower growth in manufacturing. With both sides of the economy thus losing some momentum, some contend, the Federal Reserve may be inclined to lower interest rates further.

On Sept. 18, the Fed reduced benchmark rates by half a percentage point. It meets again at the end of October to decide whether to make borrowing cheaper and, perhaps, stoke spending.

Within the service-sector report were items that might give the Fed pause: expansion in employment and accelerating prices — signs that price increases might not be easing.

The employment index for September registered 52.7, up from 47.9 in August.

The Institute for Supply Management’s prices index rose to 66.1 last month from 58.6. In August, prices for commodities like oil, metals and grains declined amid a broad sell-off in the financial markets, and in September they bounced back.