Monday, November 5, 2012

Service sector sluggish but still growing

The ISM Service Sector Business Activity Index fell last month, but remains comfortably above 50, suggesting that the sector continues to expand, albeit slowly.

This next chart compares the ISM Service Sector Composite index for the U.S. to that of the Eurozone. The U.S. continues to grow, but the Eurozone continues to contract. Weakness in Europe may be contributing to sluggish activity here, but the U.S. has not contracted the Eurozone flu.

The relatively high level of the prices paid index suggests that the U.S. is more likely to be suffering from too much money than too little. Despite sluggish economic activity, there is clear evidence of inflation. The Fed may be overstaying its welcome in QE territory; we're more likely to see higher inflation than lower inflation in the years to come.

The one bright spot in today's ISM release was the employment index, which showed a decent gain. This suggests that economic activity is still likely to expand in the future.

Altogether, not much in the way of new news here. It's steady as she goes, at a relatively slow pace. A disappointingly weak recovery, but still a recovery.


McKibbinUSA said...

Separate from the Presidential elections, various measures appearing on the California ballot will also be decided -- I am eager to find out if Californians will approve tax increases -- if the tax increases are approved, state workers will begin yearning for steep pay raises -- if the tax measures are disapproved, then Gov Brown will have to lead either cut California public spending, or seek a Federal bailout -- again, I am eager to see how the tax measures resolve in California...

Bill said...

What's your prediction for tomorrow's election?

Jake said...
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