Growth Slows in Services Sector
ISM's nonmanufacturing index slid to 52.4 in March -- lower than economists forecast.
From Wire Reports Posted April 5, 2007
http://www.orlandosentinel.com/business/orl-econ0507apr05,0,6558117.story?coll=orl-business-headlines
Service industries grew at the slowest pace in almost four years in March, leaving the economy more exposed to slumps in manufacturing and housing.The Institute for Supply Management's index of nonmanufacturing businesses including banks, builders and retailers slid from 54.3 to 52.4, lower than economists anticipated.
Orders placed with American factories rose 1 percent in February, the Commerce Department said Wednesday in Washington, also less than analysts predicted.Services, which account for 90 percent of the economy and have propped up growth for the past year, are now being hurt by rising fuel costs and slowing sales.Even so, March was the 48th straight month of growth in the nonmanufacturing industries."We're in a very uncomfortable place right now," said Cary Leahey, senior economist at Decision Economics Inc. in New York. "Not only are things more uncertain, but the risks of slower growth have gone up."
Climbing costs also make it tough for the Federal Reserve to respond to weakness in the economy by cutting interest rates. Stocks had little reaction to the report, holding onto their gains of the previous session. The Dow Jones industrial average rose 19.75, or 0.16 percent, to 12,530.05. Broader stock indicators made modest gains, with the Standard & Poor's 500 index rising 0.11 percent to 1,439.37, and the Nasdaq composite index gaining 0.34 percent to 2,458.69.
Traders' attention will now shift to the Labor Department's monthly jobs report on Friday, which economists predict will show a pickup in employment.The ISM report found that new export orders, a sign of strength in previous reports, fell hard in March. The export orders index showed a contraction for the month, coming in at 48.5 and down from 59 in February.David Resler, chief economist at Nomura Securities, said that in addition to housing, slowing business investment in machinery and other goods has also weighed on the economy last month."Why it's slowed down is a bit of a puzzle," he said, since all the conditions for business investment are in place: corporate profits are high, interest rates are still relatively low, and companies are putting their current equipment to heavy use.
This article puzzled me, and I read it numerous times. Why would the service industries (retail most specficially) be decreasing as more people are becoming employed? It seems to me that more people employeed would cause an increase in spending. Are fuel costs that much of a concern? I can not find a plausible explanation to this problem, and the more i research it, the more it seems no one is sure of the reason this happening. Why aren't consumers spending their money? This is not good news for our economy, we need consumers to spend. Why is this happening and what can we do to change it?
Subscribe to:
Post Comments (Atom)
3 comments:
Do you know what the inflation rate has been on a lot of products? I know gas prices have been increasing, but I was wondering if the average cost of living has also increased dramatically or not. If people are earning the same wage or a lower wage than before they will have as less money to spend on retail items or other services that are not necessities.
This article is a little confusing, I agree.
I think rising fuel costs are a big part of the problem due to the fact consumers are being forced to cut discretionary spending more than ever before. One thing I don't understand about this article (and your last article on the housing market)is how employment is rising on average in the U.S., and yet the housing market is suffering remarkably. Shouldn't employment and the housing market be linked in some way to each other?
So much macro, so little time! :)
First - the market is still growing, just not as quickly as before - so the number is down. If it grew 60% last year, but now grows 52%, it's in a slump - but only in comparison to last year.
Second - inflation is pretty constant and low - one good (such as gas) cannot really change the entire inflation rate, but it will affect (effect?) things that deal with gasoline. Inflation has been hovering at about 3% for the last year or so, give or take.
Third - housing starts shows a number of things, including people's opinion on what is happening in the economy. So - if people think that the economy will be going down soon, they will not take the time to start a home, because of fear of inflation, unemployment, etc.
Oops - bell rang. Gotta go.
Post a Comment