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Service Sector Continues to Struggle EU and US According to IMS and NTC-Reuters Surveys
Feb 7, 2002

Non-Manufacturing Business Activity reported by a slight contraction in January according to the Institute of Supply management (ISM) Index, which was 49.6 percent. The index is 0.5 percentage points lower than in December when a reading of 51.1 indicated that services activity was resuming growth after three months of continued contraction in services. Reduced activity was reported by 31 percent of members compared to 27 percent in December. At least 14 industry groups contracted or had no change from December, with insurance, communications and utilities registering the largest contractions. Increased business activity in January was reported by 21 percent of members, the same proportion as in December. The fastest growing sectors were business services, legal services and real state. In January, the remaining 48 percent of members indicated no change in business activity compared to 52 percent in December.

In January service sector activity recovered in the Eurozone according to the Reuters Services Business Activity Index that rose from 49.2 in December to 51.0 in January. The increase in January, which is above the 50.0 no change level to signals a marked turnaround in service sector growth from the contraction that started last October.

Activity rose in Ireland that experienced the sharpest rise. France and Italy also recorded growth in service sector activity, while further contractions were recorded in Germany and Spain. However, in these two countries, the rates of decline were modest; indicating that the services sector recession is reaching a bottom.

According to the ISM survey of US non-manufacturing activity employment continued to contract reaching an 11 month decline. The employment index for January was 44.5 percent compared to 44.4 percent in December. The industries reporting growth in employment in January were Mining and Retail Trade. Industries reporting the highest rates of reduction in employment in January were: Agriculture; Communication; Construction; Transportation; and Utilities. In the Eurozone service sector employment fell slightly after the index reading was 49.7 and completed a fourth month in a row contraction in January. Employment rose modestly in France and Italy, and contracted in Germany, Spain and Ireland.

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