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ISM services index drops to 22 month low
Monday, December 05, 2011
The Institute for Supply Management (ISM) released a report on Monday, December 5, indicating that the Arizona-based organization's non-manufacturing index dropped in November to its lowest point in 22 months. MarketWatch reports that this was the first discouraging report after a spate of positive economic data was released. The metric is significant because around 90 percent of the U.S. labor force works in the services sector, according to The Associated Press.
The ISM indicated that its non-manufacturing index fell to a reading of 52.0 percent in November from 52.9 percent in October. Since any reading that exceeds 50 signifies expansion, the metric indicates that the sector is growing. However, this was the lowest reading since January of 2010, which was 22 months ago.
The reading fell short of the predictions of economists polled by Bloomberg, who estimated that the index would rise to 53.9 percent. The estimates of the 79 economists who participated ranged from 51.5 percent to 55 percent. The economists polled by MarketWatch predicted that the reading would rise to 54.0 percent, which was also ahead of the ISM reading.
"Customers are nervous about the future of their jobs and incomes," a purchasing manager working in the accommodation and food services industry who participated in the ISM survey told the media outlet. "Due to this fact, our sales are down and our need to hire more employees is, too."
The Employment Index dropped 4.4 percent to reach 48.9 percent, providing evidence that employment in the sector is contracting. According to the media outlet, this reading compares to the a recent jobs report provided by the Labor Department which stated that 146,000 jobs were created in the services sector in November and a separate report from Automatic Data Processing indicating that 178,000 jobs were created in services that month. The agency data also indicated that the unemployment rate fell to 8.6 percent in November. In addition, The New Orders Index rose 0.6 percent to hit 53 percent. This month was the 28th month in a row of readings above 50, which signal expansion.
Investors who engage in online stock trading might benefit from monitoring reports on services sector activity such as this one.
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