Service Sector Growing, but Expansion Remains Anemic
The service sector grew last month but remains feeble as high unemployment and tight credit place pressure on consumers and businesses alike.
The Institute for Give Management?s non-manufacturing index, which primarily covers the service sector, rose to 50.5 from 49.8 in December, the industry group said Wednesday. Levels above 50 indicate expansion.
Shifting into progression mode is a go in the right direction, but service sector endeavor, which accounts for the bulk of U.S. economic output, is still at depressed levels. The non-manufacturing reading comes just days after a separate ISM index of manufacturing endeavor showed it was on the rise at a much quicker pace than its service counterpart.
“Our best guess is that the non-manufacturing index is being weighed down by the continuing weakness of retail sales and domestic demand in general,? Paul Ashworth, a Capital Economics Ltd. economist said in a note to clients. ?The non-manufacturing survey is also doing a better job of picking up the continuing difficulties at small firms, who can’t get the credit from their banks to boost employment or investment.?
The details of the report didn?t offer signs of a vigorous rebound. New orders expanded at a quicker pace last month and business endeavor continued to expand, albeit at a slower rate. But just four out of 15 industries reported progression and the orders backlog contracted at a quicker pace.
The employment index improved but stayed below the 50-level as companies continue to be hesitant to add workers until it?s apparent that the recent improvement in business endeavor is sustainable.
?Companies are really going to take that wait and see approach,? said Anthony Nieves, chair of the non-manufacturing survey committee. He prominent that, in their comments, companies said there were maintaining hiring freezes and leaving open positions unfilled.