Monday, July 6, 2009

Contraction is not an Improvement: Services Edition

Bloomberg reports (Bold Mine):

U.S. service industries from retailers to homebuilders contracted last month at the slowest pace in nine months, as measures of new orders and employment improved.

The Institute for Supply Management’s index of non- manufacturing businesses, which make up almost 90 percent of the economy, rose to 47 -- higher than forecast -- from 44 in May, according to data from the Tempe, Arizona-based group. Readings less than 50 signal contraction.

The index’s third straight monthly improvement reflects signs of stabilization in housing and consumer spending. That combined with leaner inventories means companies may start expanding output again in coming months. Still, mounting job losses and stagnant wages are likely to restrain some purchases, limiting the impact of any recovery.

Below 50 = Contraction; ISM Non-Manufacturing = 47; What did the services portion of the economy do in June? Contracted.



Source: ISM