Thursday, April 03, 2008

ISM Services report continues to flirt with recession but shows slight improvement

The ISM Non-Manufacturing (services) report covering March showed a little improvement in the services sector, but still indicates that the economy continues to flirt with recession. The overall NMI (Non-Manufacturing Index) came in at 49.6, very modestly below the breakeven level of 50.0, indicated that the services sector is just barely contracting. The good news is that the Business Activity Index rose moderately from 50.8 to 52.2, indicating a pickup in growth. Other good news is that New Orders flipped from contraction to slight growth. The other good news is that New Export Orders flipped from contraction to reasonably strong growth. Unfortunately, Employment continues to contract and the Backlog of Orders is contracting at a faster pace. Overall, this report tells a mixed story of an economy on the edge of recession but continuing to recover.

In short, the bad news is that the services sector remains weak and on the edge of recession, but the good news is that business is picking up. Of course it is always possible that the pickup could be fleeting and head south at a moment's notice, but at a minimum we are not faced with current evidence of "a deepening recession."

-- Jack Krupansky

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