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US Service Sector Contracts in January
Tuesday February 5, 11:20 AM EST
NEW YORK (AP) — For the first time in almost five years, the nation's services sector — including restaurants, travel, banking, construction and retail — contracted in January, stoking rising worries of a recession.
The Institute for Supply Management's report, released Tuesday, shook the stock market while bond prices surged. The Dow Jones industrial average, the Standard & Poor's 500 index and the Nasdaq composite index all fell in morning trading.
"This is an absolute collapse of this index," said Nigel Gault, chief U.S. economist at Global Insight.
The Institute for Supply Management reported that its index of service sector business activity declined to 44.6 in January from a revised reading of 54.4 in December. Economists surveyed by Thomson Financial/IFR had expected a slight slowdown but had still forecast growth, with a median estimate for the index of 53.
A reading above 50 indicates expansion, while below 50 indicates contraction. It was the first time the service sector reading has contracted since March 2003.
The consensus among survey respondents was that the services sector, which accounts for about two-thirds of the economy, has "come to the end of a long-term period of growth," said Anthony Nieves, chairman of the Institute for Supply Management's non-manufacturing business survey committee.
Gault said that in March 2001, the beginning of the last recession, the index had a break-even reading of 50 and during that recession, the index hung around 48 or 49 — several points higher than January's reading.
"This is a very bad report," Gault said, in terms of convincing economists that we may be in or headed for recession. "I think it will be tipping plenty of people over the edge."
http://finance.myway.com/jsp/nw/nwdt_rt.jsp?section=news&feed=ap&src=601&news_id=ap-d8uk8r080&date=20080205
Tuesday February 5, 11:20 AM EST
NEW YORK (AP) — For the first time in almost five years, the nation's services sector — including restaurants, travel, banking, construction and retail — contracted in January, stoking rising worries of a recession.
The Institute for Supply Management's report, released Tuesday, shook the stock market while bond prices surged. The Dow Jones industrial average, the Standard & Poor's 500 index and the Nasdaq composite index all fell in morning trading.
"This is an absolute collapse of this index," said Nigel Gault, chief U.S. economist at Global Insight.
The Institute for Supply Management reported that its index of service sector business activity declined to 44.6 in January from a revised reading of 54.4 in December. Economists surveyed by Thomson Financial/IFR had expected a slight slowdown but had still forecast growth, with a median estimate for the index of 53.
A reading above 50 indicates expansion, while below 50 indicates contraction. It was the first time the service sector reading has contracted since March 2003.
The consensus among survey respondents was that the services sector, which accounts for about two-thirds of the economy, has "come to the end of a long-term period of growth," said Anthony Nieves, chairman of the Institute for Supply Management's non-manufacturing business survey committee.
Gault said that in March 2001, the beginning of the last recession, the index had a break-even reading of 50 and during that recession, the index hung around 48 or 49 — several points higher than January's reading.
"This is a very bad report," Gault said, in terms of convincing economists that we may be in or headed for recession. "I think it will be tipping plenty of people over the edge."
http://finance.myway.com/jsp/nw/nwdt_rt.jsp?section=news&feed=ap&src=601&news_id=ap-d8uk8r080&date=20080205
