The non-manufacturing sector in the US continued to contract in January, but at a slower pace than what was expected, according to the Institute of Supply Management’s non-manufacturing index. The financial crisis, as well as the continuing housing contraction, has reached all facets of the economy, and the services sector is feeling a lot of the pain. But this month’s reading is good news we desperately wanted. The NMI came in at 42.9%, still deep in recessionary levels, but above December’s 40.1% reading and the record-low (37.3%) recorded in November. Economists had forecast the index to contract further, to 39%, so the report is somewhat of a bright spot. Readings above 50% indicate growth, and anything below, contraction.

NMI History

Month NMI Month NMI
Jan 2009 42.9 Jul 2008 49.6
Dec 2008 40.1 Jun 2008 48.8
Nov 2008 37.4 May 2008 51.2
Oct 2008 44.6 Apr 2008 51.9
Sep 2008 50.0 Mar 2008 49.9
Aug 2008 50.4 Feb 2008 49.7
Average for 12 months — 47.2
High — 51.9
Low — 37.4

The Business Activity Index also recovered significantly from its record lows felt just two months ago. The index came in at 44.2%, up from 38.9%. The new-orders index climbed to 41.6% from 38.9%, and the employment index held steady to 34.4% from 34.5%.

Report Details

Only two industries reported growth in January- Healthcare, and Finance & Insurance.

The 16 industries reporting contraction: Mining; Retail Trade; Arts, Entertainment & Recreation; Educational Services; Professional, Scientific & Technical Services; Wholesale Trade; Accommodation & Food Services; Transportation & Warehousing; Other Services; Management of Companies & Support Services; Public Administration; Real Estate, Rental & Leasing; Agriculture, Forestry, Fishing & Hunting; Information; Construction; and Utilities.

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