MORE DOOM AND GLOOM….Despite December’s gloomy news, forecasters continued to predict through January that the economy was still expanding. But although the manufacturing sector grew a bit, the much larger service sector took a huge and unexpected nosedive:
On Tuesday, the Institute for Supply Management reported that its January non-manufacturing index slid to a reading of 41.9, from December’s revised figure of 54.4….Readings over 50 indicate growth, and forecasters had expected the overall index to have hit 52.5 in January.
….The survey results are “downright disastrous. These are recessionary readings,” said Stephen Stanley of RBS Greenwich Capital. “The tea leaves are quickly accumulating. Payroll employment has flattened. The Christmas retail season was weak. Consumer spending seems to have weakened further in January, as auto sales fell noticeably and chain store reports seem to have been quite soft. And of course the housing sector is a mess.”
According to ISM, only three industries reported growth in January: Utilities; Professional Services; and Educational Services. The other 14 all contracted, including: Arts, Entertainment & Recreation; Agriculture, Forestry, Fishing & Hunting; Construction; Accommodation & Food Services; Transportation & Warehousing; Management of Companies & Support Services; Health Care & Social Assistance; Finance & Insurance; Information; Wholesale Trade; Retail Trade; Public Administration; Other Services; and Real Estate, Rental & Leasing.
In other words: it’s not just the financial and real estate sectors anymore. Everyone is suffering. Presidential hopefuls take note.
UPDATE: More here from Paul Krugman. This looks ugly.