Home Page




About Us




Reports




Statistics




New Laws/Regs




Library




Facts




Opeds and Speeches




Links



Contact Us



Topic
Region
Industry




Reports

How the Growing Importance of Services is Changing the Business Cycle
Jun 8, 2002

1 2 3 4 >>
  • Comment Board
  • In May United States non-manufacturing business activity, which includes services increased at the strongest rate since August 2000, according to the periodic survey of the Institute of Supply Management. The services sector in the US arrived late to the slump that had troubled manufacturing and agriculture and never really fell into a recession like the other sectors of the US economy. Now that manufacturing has rebounded, services has rapidly followed suit. The index registered 60.1 percent, 10 percentage points above the break-even level of 50, and indicates that the growth trend that started in March has consolidated.

    This phenomenon is not unique to the U.S. The United Kingdom index of services activity also increased its rate of growth from 54.5% in April to 56.7% in May according to the Chartered Institute of Purchasing and Supply report released on June 7, 2002. Similarly, Eurozone services industries registered positive growth, albeit slower than in April, after the Eurozone Index of Business Activity published by NTC-Research and Reuters registered 52.1% in May.


    Given the large weight of services in the overall economy, this trends are welcomed and confirms earlier calls that the synchronize downturn that started early in 2001 in the United States and later in the United Kingdom, and the Eurozone is no behind us.

    In the United States the industries reporting the highest rates of growth of business activity in May were business services, transportation, wholesale trade, and other services such as hotel, and social services. In turn, the industries reporting contraction of business activity in may were health services and construction.

    The welcomed data on services activity was released at the same time that the latest OECD report on “Ongoing Changes in the Business Cycle” that claims that services and sound macroeconomic management have dampen the business cycle in advanced economies.

    Services influence the business cycle in at least three ways. First, the growing importance of services output has reduced the importance of stockbuilding typical of manufacturing. Second, services consumption not only has increased, but also become more stable, leading to lower variation in services supply and in overall output. Finally, growing financial deepening has led to consumption smoothing for goods and in particular for durable goods, which has also contributed to reducing variation in consumption.

    1 2 3 4 >>

    Comments [Add Comment]


    No comments posted as of 10/20/2007.

    About Us | Statistics | New Laws/Regs
    Library | Facts | Opeds and Speeches | Links | Contact Us




    Copyright © 2000, The Mark Twain Institue.
    This web site was programmed and designed by Americaneagle.com, Inc.