September 6, 2001

Non-Manufacturing Sector Slumps, Too

Just days after Wall Street jumped for joy as the NAPM manufacturing index advanced to 47.9 in August from 43.6 in July, the non-manufacturing survey indicates that this sector -- which makes up four-fifths of the economy -- is getting worse. The non-manufacturing NAPM index tumbled to 45.5 in August from 48.9 in July -- the fourth month in the last five in which the sector contracted (a reading below 50 indicates contraction). For its part, despite the slight uptick reported on Tuesday, the manufacturing sector also has been contracting for the past 13 months, according to the NAPM.

So far, manufacturing has been the only sector mired in a recession, but this latest trend tells us that the non-manufacturing sector could quickly follow suit. And as this sector continues to contract, it will be much harder for the manufacturing sector to pull out of its slump despite its slight improvement in August. Clearly, the non-manufacturing sector is grabbing the reins on the road to recession.

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