Service industries in the U.S. contracted in April at the slowest pace in six months, signaling the economic slump is gradually abating. The Institute for Supply Management’s index of non- manufacturing businesses, which make up almost 90 percent of the economy, rose to 43.7, higher than forecast, from 40.8 the prior month, according to the Tempe, Arizona-based group. Readings below 50 signal contraction. Increases in consumer spending, rising confidence and stable home sales have added to signs the worst recession in at least half a century may end later this year. Even when it does arrive, an expansion is likely to be tempered by job losses, a continued lack of credit and falling home prices. “The economy is on a path to stabilize,” Aaron Smith, a senior economist at Moody’s Economy.com in West Chester, Pennsylvania, said before the report. “The oncoming fiscal support will prevent a renewed slide in consumer spending.” Still, “it’s not going to be a boom-like recovery,” he said. The index was projected to increase to 42.2, according to the median forecast in a Bloomberg News survey of 66 economists. Estimates ranged from 38 to 46. The ISM non-manufacturing industries index of employment rose to 37 from 32.3 the prior month, and its gauge of new orders climbed to 47, the highest level since September, from 38.8 in March. Exports Jump A measure of prices paid increased to 40 from 39.1. The measure of new export orders jumped to 48.5 from 39. The ISM’s April manufacturing gauge, released last week, showed the slowest pace of contraction in seven months. Homebuilding, included in the ISM non-manufacturing index, is likely past its biggest declines as sales stabilize. Pending sales of existing homes posted the first back-to-back gain in almost a year in March, figures showed yesterday. Still, banks aren’t making credit easier to get. The Fed’s quarterly survey of senior loan officers yesterday showed a larger share of banks reported tightening terms on residential mortgages compared with the prior survey, even as more domestic respondents saw increased demand for prime mortgages. A lack of credit is one reason economists surveyed by Bloomberg last month predict it will take time for gains in consumer spending, the biggest part of the economy, to be sustained. Spending Rises Purchases climbed 2.2 percent in the first three months of this year, halting their biggest slide since 1980. The economy shrank at a 6.1 percent annual pace after contracting 6.3 percent in the fourth quarter of 2008. The pace of economic contraction “appears to be somewhat slower,” the Federal Reserve said last week after its policy meeting, when it held interest rates close to zero. Another cause for concern is the faltering labor market. The economy has lost 5.1 million jobs since the recession began in December 2007, the most of any economic slump in the post- World War II era. A Labor report this week may show payrolls fell by more than 600,000 workers in April for a fifth straight month, according to the Bloomberg survey median. Filene’s Basement Inc., the century-old clothing chain, yesterday sought bankruptcy protection, the second time in almost a decade, after sales slumped. Las Vegas-based Wynn Resorts Ltd.’s revenue is down as business at casinos slows, Chief Executive Officer Steve Wynn said last week. “People who have lost their jobs and whose businesses are in trouble don’t have money for leisure and optional expenses,” Wynn said in an April 28 speech in Beverly Hills, California. Starbucks Corp., the world’s largest coffee-shop operator, is among companies seeing an improvement. The Seattle-based company last week reported sales and customer traffic declined at a slower rate in the second quarter than the first.

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