The index is a survey of a wide variety of businesses — the sector employs 90 percent of all workers, including those employed at restaurants, hotels and retailers.
Business activity fell to 55.4 from 59.9 and new orders dropped by 2.9 percentage points to 54.8 while employment increased for the third straight month, lining up the final economic picture before Tuesday's election.
Last week produced a slew of positive economic data from manufacturing to consumer confidence and the gradually improving housing market, only a few days ahead of voters going to the polls.
President Obama and Republican nominee Mitt Romney have sparred over their visions for more robust economic growth.
A separate report produced by the government on Friday showed employers added 171,000 jobs in October and hiring picked up in August and September.
The unemployment rate ticked up to 7.9 percent from 7.8 percent in September but mostly because more people re-entered the labor force to look for work and not everyone found a job.
Service companies have contributed heavily to job gains this year.