Financial Sight: U.S. service industry contracts as consumers tighten belts

The Institute for Supply Management released their October 2008 Non-Manufacturing ISM Report on Business today. The Non-Manufacturing Index (NMI) came in at 44.425%. 50% is the breakpoint for growth in the non-manufacturing sector. Economists had expected a reading of 47%. NMI had plunged to 44.6% in January 2008 but has been between 48%-52% ever since then. This is the lowest level for NMI on record. The service area is quickly deteriorating just like the manufacturing sector.

NMI is made up of four components: business activity, employment, new orders, and supplier deliveries. Business activity was at 44.2% in October down from 52.1% in September; employment was at 41.5% down from 44.2%; new orders were at 44.0% up from 50.5%; and supplier deliveries were at 48.0% down from 53.5%.

Here is what some of the respondents were saying:

"Financial services industry continues to be impacted by the global economic crisis — impacting all aspects and areas of the business and supply management." (Finance & Insurance)

"Economic slowdown starting to have an impact on customer count and check averages." (Accommodation & Food Services)

"Uncertainty is having the usual effect on business. Our response is traditional — stop all discretionary spending." (Management of Companies & Support Services)

"General pick-up in business in spite of all the bad economic global news." (Wholesale Trade)

"We are experiencing a slowdown in new job orders and existing job awards are lower. Clients are not extending project support professionals." (Professional, Scientific & Technical Services)

"Business down significantly! Discretionary spending disappearing." (Arts, Entertainment & Recreation)