US Service Sector Contracts Sharply and Broadly
Today’s report from the Institute for Supply Management that helped send the stock markets to their worst drop of the year so far makes for sobering reading.
The decline in business activity in the US non-manufacturing sector in January – the first drop in 58 months - was significant in its sharpness and breadth, as illustrated by the ISM’s table:
Beginning with the January 2008 report, the composite index is calculated as an indicator of the overall economic condition for the non-manufacturing sector. The NMI is a composite index based on the diffusion indexes for four of the indicators with equal weights: Business Activity (seasonally adjusted), New Orders (seasonally adjusted), Employment (seasonally adjusted) and Supplier Deliveries.
January’s NMI at 44.6% indicates a contraction in the non-manufacturing sector.
A reading above 50% indicates the non-manufacturing sector economy is generally expanding; below 50% indicates the sector is generally contracting.
Only three industries reported growth in January based on the new NMI composite index: Utilities; Professional, Scientific & Technical Services; and Educational Services.
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