Index Suggests Mixed Growth Among Services Industries

Date: December 07, 2015

Real Estate, Retail Among Growing Sectors; Utilities, Agriculture See Declines

According to the latest Institute for Supply Management data, in November its services index fell to 55.9 from October’s 59.1 reading. This reading was the lowest since 55.7 in May, according to the AP, although a reading over 50 indicates expansion in the industry is continuing. The survey found “slower growth for business activity, new orders and employment in the services sector.” The purchasing managers surveyed for the index cover sectors including financial services, health care, construction, and retail. Reuters further detailed the index’s reading, noting that new orders dropped 4.5 points in November to 57.5, with declines also hitting measures of the service sector’s employment, backlogs and export orders. Among the 12 service industries that expanded were real estate, retail, transportation and warehousing, while the six industries that reported contraction included utilities and agriculture. The Wall Street Journal reported that economists had expected the overall index to fall to 58.4. Although the index fell more than forecast, the Journal said the index shows continued growth and the sector remains resilient. Bloomberg News reported that “the business activity index, which parallels the ISM’s factory production gauge, dropped to 58.2 last month from 63 in October.”

What This Means For Small Businesses

News of a decline in service sector activity points to a potential weakening of the US economy as a whole. These data echo the NFIB’s latest Small Business Economic Trends survey. NFIB chief economist William Dunkelberg said of current economic conditions, “GDP growth languished in Q3, and will not likely impress in Q4. The industrial sector is weakening and the small business sector has not returned to its historical role in the production of GDP and jobs. The October NFIB survey gave no indication of a resurgence in growth in the small business sector, readings remaining below average.”

Additional Reading

Barron’s Blog also covered the services firm index.

Note: this article is intended to keep small business owners up on the latest news. It does not necessarily represent the policy stances of NFIB.

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