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Wednesday, November 05, 2008 11:17 AM


Service Sector ISM At Record Low 44%


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MarketWatch is reporting Service sector crumbles under weight of woes.

Readings below 50% in the diffusion index indicate more firms are contracting than expanding. In October, only three out of 18 industries were growing.

The new-orders index fell in October to 44.0% from 50.8% in September. The prices-paid index fell to 53.4% in October from 70.0% in September, the largest one-month drop on record.

Comments from purchasing managers were mostly negative about business conditions in October, ISM said.

"Uncertainty is having the usual effect on business. Our response is traditional - stop all discretionary spending," one manager told the ISM.
What's with this uncertainty nonsense? Does uncertainty only run in one direction? There is plenty of certainty especially about jobs. Unemployment is going to rise and consumers are fearful.

There is a sense of certainty in businesses as well. They know consumers are retrenching so they are laying off workers. Some will call this a negative feedback loop but what is happening is the inevitable result of a party that lasted too long, on money too cheap from the Fed.

Previously we discussed U.S. ISM Manufacturing Index At 26-Year Low.
The purchasing managers' gauge of new orders for factories decreased to 32.2, the lowest level since 1980, from 38.8 the prior month. The production measure fell to 34.1 from 40.8.

The index of prices paid dropped to 37 from 53.5. Energy prices have plunged from their peaks in July, when a barrel of crude oil reached $147.

The employment index decreased to 34.6 from 41.8 in August. The economy has lost more than three-quarters of a million jobs so far this year.

Orders from overseas have weakened as economies abroad falter. ISM's export gauge dropped to 41, the lowest reading since records for this component began in 1988.
Prices Paid

The prices-paid index on services fell to 53.4% in October from 70.0% in September, the largest one-month drop on record.

The index of prices paid for manufacturing dropped to 37 from 53.5.

Demand is collapsing for both services and manufacturing and it is reflected in falling prices. The CPI will soon be reporting negative year over year numbers.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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