Service Industry contracts at record pace

The Institute for Supply Management released their November 2008 Non-Manufacturing ISM Report on Business today. The Non-Manufacturing Index (NMI) came in at 37.3%. 50% is the breakpoint for growth in the non-manufacturing sector. Economists had expected a reading of 42%. NMI had plunged to 44.6% in January 2008 but has been between 48%-52% until October when it dropped to 44.4%.  37.3% is the lowest level for NMI on record. The service area is quickly deteriorating along with the rest of the economy.

NMI is made up of four components: business activity, employment, new orders, and supplier deliveries. Business activity was at 33.0% in November down from 44.2% in October; employment was at 31.3% down from 44.2%; new orders were at 35.4% down from 50.5%; and supplier deliveries were at 49.5% up from 48.0%.

This is what some of the respondents were saying:

• "General slowdown and cost-cutting actions." (Other Services)
• "Business remains strong despite the general economy." (Health Care & Social Assistance)
• "Although funding for our core goals has not changed, new programs will be curtailed." (Educational Services)
• "Store closures with associated employee layoffs, the continued downturn in the construction sector and the curtailment of local government spending have combined to hammer the local economy." (Public Administration)
• "One unusual aspect of the current environment is that suppliers are getting very selective about who they conduct business with. We are spending more and more time ensuring that our key [suppliers] continue to see us as a key customer." (Retail Trade)
• "General concerns about the economy continue to impact consumer confidence and our sales." (Accommodation & Food Services)

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