Difficulties in banking and mortgage markets likely were a drag on economic activity in the service sector in September compared with August. The Institute for Supply Management, a trade association of purchasing executives, is expected to report that its index of nonmanufacturing business activity fell to 54.5 in September from 55.8 in August, according to the consensus estimate of Wall Street economists surveyed by Thomson Financial/IFR. The report will be issued Wednesday at 10:00 am EDT. A reading above 50 indicates the economy is expanding. The ISM's nonmanufacturing index, which covers 80 percent of the economy, has mirrored economic growth patterns this year, increasing in the second quarter to a high of 60.7 in June after dropping to a four-year low of 52.4 in March. The rebound mimicked economic growth surging in the second quarter to an annual rate of 3.8 percent, up from the first quarter's sluggish 0.6 percent pace. Analysts expect the economy to slow to a 2 percent growth rate in the third quarter. The ISM services index fell to 55.8 in July and August. Economists said improved freight activity and higher retail sales in August, among other factors, should help offset the negative impact of the ongoing housing slump. "The core services industries are still moving ahead at a moderate pace, and this will be key for the sustainability of the expansion," economists at the consulting firm Global Insight said in its weekly newsletter. Still, the impact that turmoil in the credit markets is having was revealed Monday when banking giant Citigroup warned its third-quarter profit likely will decline by 60 percent, due to $3 billion in losses stemming from the reduced value of securities it holds that are backed by underperforming mortgages, as well as loans tied to failed corporate buyouts.