Economic Report: U.S. economy’s huge service sector slows again in November, ISM finds
The numbers: The huge service side of the U.S. economy slowed again in November, adding to a slew of evidence pointing to weaker growth toward year end.
The Institute for Supply Management’s survey of service-oriented companies such as hospitals, retailers and restaurants fell to 53.9% in November from 54.7%.
Numbers over 50% are viewed as positive for the economy, but the index has come down sharply from a 13-year high of 60.8% just a little over a year ago.
Even worse, the ISM’s manufacturing gauge stayed below the key 50% cutoff line in November for the fourth straight month.
What happened: The index for business production in the service sector slumped 5.4 points to 51.6%, dropping to the lowest level since 2010, accounting for most of the decline in the overall survey.
Yet new orders actually rose, as did employment and exports.
The index for employment rose to 55.5% from 53.7%, suggesting an increase in hiring for the holiday season. At the same time, though, many companies say they have a hard time finding qualified workers with the unemployment rate near a 50-year low.
Altogether, 12 of the 17 industries tracked by ISM said their businesses were expanding. A year ago all but one were growing.
A similar survey of the service side of the U.S. economy produced by IHS Markit edged up to 51.6% in November from 50.6%.
Big picture: The U.S. economy has slowed along with the rest of the globe in no small part because of the ongoing trade dispute with China.
The spat between the world’s two largest economies has disrupted supply chains and caused businesses to spend and invest more conservatively. Farmers and manufacturers have been particularly hard hit.
What they are saying? “We’re optimistic [because the] economy appears to be on autopilot, despite all the political distractions. Stock market seems invincible, trade war with China appears to be in a stalemate,” said an executive at a professional-services firm.
“Tariffs are impacting prices for a broad array of products used in the delivery of services and completion of projects for our clients,’ said an executive at a holding company. “Numerous suppliers report looking for alternative manufacturing/supply locations outside of China, but with limited or no success so far.”
Market reaction: The Dow Jones Industrial Average
and S&P 500
rose in Wednesday trades for the first time in four days.
The 10-year Treasury yield
edged up to 1.74%. One year ago the yield was above 3%.