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The Institute of Supply Management reported that the service sector shrank in November. The reading of 48.7 was down from 50.6 in October and much lower than the median of 51.5 expected by analysts.
Why is this number so important? The reason is that the service sector accounts for 80% of US economic activity. A reading below 50 indicates shrinkage in 80% of our economic activity.That is not good news. Dan Cook of IG Markets said: "Seeing the number below 50 there, that to me is pretty harsh."
The business activity index fell to 49.6 in November, down from 55.2 in October. This too, is a big drop.
The prices paid index rose to 57.8 from 53 in October. New orders index fell to 55.1 from 55.6 in October.
The employment index rose to 41.6 in November from 41.1 in October. However, it stood at 44.3 in September.
Overall, this is not good news. Economic activity is not picking up. Instead it is shrinking. And since the service sector accounts for such a big chunk of our economy, it will drag the base of business activity down. We must ask ourselves, is our economy getting better? While some numbers indicate a slight improvement, these data certainly point downward.
Do you believe that the service sector will improve next year?
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Reader Comments (Page 1 of 1)
12-03-2009 @ 4:18PM
william lindblad said...
Easy - NO.
Service sector spending is business travel first and senior citizens 2nd.
nuff said.
12-03-2009 @ 5:06PM
clikdawg said...
Some numbers on restaurant closings would be an interesting sub-indicator -- how many, say, and whether chain or home-grown.
The lending squeeze play now in session is forcing small businesses out of the game the way small farmers were squeezed out back in the day; when there was, no doubt, as much phony public 'backbone of America" type lip service paid to the little guy by Administration officials (while they privately stabbed him in the back) as we see in the there and now.
There were no unintended consequences in the drive to crush family farms for the benefit of Big Agri-business, nor are there any now as small firms struggle to survive.
The Big Fish want it all, Ms Madon: Just like Johnny Rocco in 'Key Largo' they always want more, and do not dream for a moment that they can ever get enough.