Business | Economy
From banks to builders, services sectors post fastest decline in US
The US service industries probably shrank in December at the fastest pace on record as consumers retrenched and the housing slump worsened, economists said on Tuesday.
- Bloomberg
- Published: 23:58 January 6, 2009
New York: The US service industries probably shrank in December at the fastest pace on record as consumers retrenched and the housing slump worsened, economists said on Tuesday.
The Institute for Supply Management's index of non-manufacturing businesses, which make up almost 90 per cent of the economy, fell to 36.5, the lowest level since records began in 1997, according to the median forecast in a Bloomberg News survey.
Fewer Americans signed contracts to buy existing homes in November and factory orders fell, other reports may show.
Mounting unemployment, plunging home values and frozen credit markets will keep stifling businesses from banks to builders, and retailers faced what may have been the worst holiday shopping season in at least four decades.
President-elect Barack Obama has called for stimulus of unprecedented proportion to prevent the recession from deepening much more.
"The recession is turning out to be a pronounced one," said Michael Moran, chief economist at Daiwa Securities America Inc in New York. "There are multiple problems and multiple sources of the downturn, and things are feeding on one another."
Estimates in the Bloomberg survey of 61 economists ranged from 34 to 42, following a reading of 37.3 in November. Figures less than 50 signal a contraction.
Also at 10am on Monday (7pm, UAE time), the National Association of Realtors' index of signed purchase agreements, or pending home resales, fell 1 per cent in November, according to the survey. The drop would be the fourth in the past five months.
Orders to factories fell 2.3 per cent in November, a fourth consecutive drop, according to the median forecast ahead of a Commerce Department report that was due yesterday.
The contraction in services reinforces the deteriorating outlook. The economy probably lost jobs in December for a 12th month as firings rippled from factories and construction companies to retailers and banks, economists project the Labour Department's January 9 employment report will show.
Manufacturing, which makes up the other 12 per cent of the economy, shrank in December at the fastest pace in 28 years as new orders for products from cars to furniture reached the lowest level since records began in 1948, ISM reported last week.
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