Service-Sector Growth Slowed Sharply As Price Pressures Increased in January
A WSJ.COM News Roundup
TEMPE, Ariz. -- The service sector just barely grew in January, which, when coupled with last week's weak manufacturing report, suggests the overall economy may have contracted last month.
The National Association of Purchasing Management reported Monday that its nonmanufacturing index fell to 50.1 in January, down from 61.1 the month before. Index readings above 50 indicate expansion of business activity and prices, while sub-50 readings denote contraction.
January's reading was the lowest since the survey's inception in July 1997.
Meanwhile, price pressures accelerated, with the purchasing managers' prices-paid index climbing four points to 62.
New orders and order backlogs decreased in January.
Inventories fell, as well, dropping for the third-straight month. The purchasing managers' inventory-change index fell to 45.5 from 48.5. Combined with higher prices, "purchasing executives felt a greater degree of discomfort with the level of inventories in January than they did in December," Ralph G. Kauffman, who runs the survey, said in a prepared statement. Mr. Kauffman is coordinator of the purchasing and supply-management program at University of Houston-Downtown.
Nonmanufacturing industries make up about 80% of gross domestic product. The manufacturing and nonmanufacturing reports, taken together, suggest that the overall economy likely contracted last month. At 41.2, the January NAPM manufacturing index was the lowest since March 1991. The manufacturing report was consistent with a 0.6% annualized contraction in gross domestic product.
Last week, the Federal Reserve cut short-term interest rates by a half percentage point. Central-bank policy makers, citing higher energy costs and eroding consumer and business confidence, said at the time that circumstances called for "a rapid and forceful response of monetary policy." |
