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The Services Sector Continues Recovery in U.S. and Europe
Apr 7, 2002

The services sector in the U.S. experienced strong growth of business activity for a second month in a row confirming analysts’ expectations that the economy has left behind what now appears to have been a rather mild economic downturn. The information released by the Institute for Supply Management –ISM on April 3, 2002 indicates that non-manufacturing business activity, which includes services and commodities, was 57.3%. The indicators was 7 percentage points above the breakeven point of 50% and just over 1 percentage points bellow the 58.7% reading in February.

The services sector also experienced a recovery in the Eurozone according to the NTC Research-Reuters indicator of business activity released on 4 April 2002. The indicator was 53.1% in March and was above the 51.5% registered in February. In the United Kingdom services sector activity increased for the third month in a row and registered 53.8% in March, a 1.7% increase from the 52.1% registered in February according to Chartered Institute of Purchasing and Supply-CIPS.

Growth of services business activity in the U.S was enhanced by the strong performance of Legal Services; Business Services; Retail Trade; Wholesale Trade, and Health Services. Among the services that contracted in March were Utilities, Finance and Banking, and Communications.

In the Eurozone, Ireland continued to evidence the strongest growth after the index of business activity was 59%, the strongest growth level since February 2001. The French services sector followed in growth with 54.7%, while the Italian services sector also continued to grow, albeit at a slower rate after the indicator in March was 53.2%. Spain’s services sector also recorded a recovery with services business activity at 51.7% in March that confirms that contraction of services activity is now behind. Most important, German services registered growth after the indicator of activity in this country registered 52.3% after close to five months of contraction of services. In February the indicator was 49.8% in Germany, bellow the 50% breakeven point.

Despite the recovery of services activity on both sides of the Atlantic, employment continues to register negative growth, although the rate of layoffs has hit a bottom both in the U.S. and Europe. In the U.S. employment continued to decrease in March after the IPM employment index registered 45.5%, yet the March level was up from the 43.6% reading in February. In Europe new business and increasing optimism stimulated the creation of new jobs after the Reuters Eurozone Services Employment Index signaled layoffs during four successive months. This is the first time since last July that all of the national service economies covered by the survey reported growth of employment. Expansion of staffing levels was strongest in France and weakest in Germany.

For further information on the U.S. Non-manufacturing survey visit the Institute of Supply Management at http://www.ism.ws/ISMReport/NMROB042002.cfm.

For additional information on the Eurozone services survey of the United Kingdom survey visit NTC Research at http://www.ntc-research.com/Uk/Open/headlines.asp where the surveys can be downloaded in PDF format.

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