Service-Sector Growth Slows In January

Date: February 04, 2016

Two Indices Hit Lowest Levels In At Least Two Years

According to the latest Institute for Supply Management data, the index of service-sector activity declined to 53.5 in January from 55.8 in December. Economists had expected the index to come in at 55.1, Bloomberg News reported. The index indicates the sector is expanding when it is over 50. Standard Chartered Bank economist Thomas Costerg said, “Manufacturing weakness seems to be spreading to the services side of the economy. There’s definitely no decoupling here. It’s a shaky outlook.” The Wall Street Journal said on its website the continued expansion of the service sector shows that the US economy remains resilient despite the increasing drag from abroad. However, some economists say the report, which was weaker than expected, could increase concern that the slowdown in the manufacturing sector is bleeding into the service industries. The AP reported the service-sector growth rate was the slowest “in nearly two years, as global economic challenges are showing some signs of spreading to consumers.”

Separately, Dow Jones Newswires reports financial services firm Markit says its index of service-sector activity came in at 53.2 in January, the lowest level in 27 months. Economists had expected the index to come in at 53.7. The Markit index also indicates the sector is expanding when over 50. Markit economist Chris Williamson said, “Deteriorating financial-market conditions, global growth uncertainties and the upcoming election are all taking their toll, not to mention the strong dollar, which is not only hurting manufacturing but is also hitting the service sector through reduced tourism and travel.”

What This Means For Small Businesses

Small businesses face the brunt of uncertain economic conditions. As the latest service-sector data indicate, even this typically growth-oriented sector is seeing uneven growth following the recession. Small businesses in the services sector appear likely to face potential declines into 2016.

Additional Reading

Reuters also reported on the ISM service-sector 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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