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Politics : Stockman Scott's Political Debate Porch -- Ignore unavailable to you. Want to Upgrade?

To: Jim Willie CB who wrote (5811)	9/5/2002 1:22:18 PM
From: stockman_scott	Respond to of 89467

Service Sector Growth Slows Again Thursday September 5, 1:10 pm ET By Eric Burroughs NEW YORK (Reuters) - Growth in the U.S. service sector eased in August to the slowest pace since January, a report said on Thursday, as the stock market's summer slide prompted a pull-back in businesses ranging from tourism to retailers. ADVERTISEMENT With the 30 percent plunge in stock indexes since March taking a toll on confidence, the Institute for Supply Management gauges of both manufacturing and the service sector have indicated a slowdown from a spurt of growth during the first half of the year. That has stirred fears the economy could head back into recession. "The odds of a double dip grow with every down movement in stocks," said Joseph LaVorgna, senior U.S. economist at Deutsche Bank Securities. ISM said its monthly non-manufacturing index unexpectedly fell in August to 50.9, showing a lackluster pace of growth, from 53.1 in July. While that was well below forecasts of a rise to 53.6, it was still the seventh straight month of expansion. A number above 50 indicates growth in the sector that makes up roughly 80 percent of the economy and includes everything from tourism to construction and legal services. A figure below 50 signals contraction. U.S. stocks and the dollar retreated on the unexpectedly weak data, while benchmark U.S. Treasuries gained. The ISM services index has tumbled nearly 10 points from a two-year peak of 60.1 in June. The new orders index, a key gauge of future growth, fell to 51.6 in August from 52.6, and the backlog of orders index rose to 48.0 from 43.5. The prices index fell to 53.5 from 59.0. NO END YET TO JOB LOSSES The ISM report came alongside news of disappointing August retail sales as shoppers headed to auto showrooms instead of buying new clothes for the usually helpful back-to-school period. Analysts also said job worries were making consumers more cautious about shelling out money for apparel and other discretionary items. Layoffs extended for an 18th month in the service sector even as the pace of those job cuts slowed. The ISM employment index rose in August to 47.3 from 45.8 in July, but was still below the 50 threshold between growth and contraction. That followed an earlier government report that said weekly jobless claims remained above the 400,000 level that typically indicates a worsening labor market. "Another jobless recovery seems to be taking shape," said Drew Matus, U.S. financial markets economist at Lehman Brothers. With the much-anticipated August payrolls report due on Friday, analysts and investors are girding for any evidence that weak business conditions are leading to more layoffs that would undermine consumer spending -- the economy's main source of strength. HUNGRY FOR HOMES AND AUTOS Consumers snapped up autos in July and August at near-record levels, lured by incentives like zero-percent financing and flush with extra cash from refinancing homes at the lowest mortgage rates in decades. Some economists are now forecasting growth of 3 percent or more in the third quarter after a meager 1.1 percent rise in the April-to-June quarter. Yet fears are mounting that such robust consumption on autos and homes can only support the economy for so long if businesses, still recovering from the overhang of capacity after the boom, do not start investing in equipment and production. Earlier this week, ISM's manufacturing index showed a second straight month of weak growth in August while new orders fell for the first time since last November -- reviving concerns that the recovery is stumbling. "The more that we stretch the consumer without a concurrent pick-up in growth elsewhere, the more worried I get," Deutsche Bank's LaVorgna said. ISM, formerly the National Association of Purchasing Management, compiles its diffusion index by surveying more than 370 purchasing executives in more than 60 service industries once a month. The responses reflect the change in the current month compared with the previous month.