ISM, Commerce Department Reports Illustrate Slowing Growth

The U.S. economy is showing signs of slowing, with two separate reports today demonstrating a weakening in both the service and manufacturing sectors.

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The Institute for Supply Management said Monday that its services index fell to 52.0 in October, down from 52.9 the month prior.

Any reading above 50 indicates expansion in the sector, though the rate of expansion decelerated slightly in October.

The ISM reading stands in contrast to a more upbeat trend in recent U.S. economic data, which includes Friday’s report that the U.S. unemployment rate had dropped to 8.6%.

“This is the first disappointing indicator we’ve seen in the last couple of weeks,” said Cary Leahey, managing director at Decision Economics in New York. Though the economy has improved, “it is still not growing very quickly,” she said.

Still, some readings in the index were more positive. A gauge of new orders rose from 52.4 to 53.0. However, the unemployment component fell to its lowest level since September at 48.9, from 53.3.

“Those who had been forecasting another recession will probably have to start rethinking things,” said Michael Yoshikami, chief investment strategist at YCMNET Advisors in Walnut Creek, California. But we “shouldn’t get too excited because we still have subpar GDP growth and stubbornly high unemployment,” he added.

In a separate report by the U.S. Department of Commerce, new orders for factory goods were shown to have declined in October for the second straight month, suggesting a possible softening in the manufacturing sector.

The Commerce Department said on Monday that orders for manufactured goods decreased 0.4 percent in October after a 0.1 percent drop in the previous month.

The report showed orders excluding transportation rose 0.2 percent, while orders for transportation equipment dropped 5.1 percent, pulled lower as demand for civilian aircraft declined 16.8 percent. Orders for motor vehicle and parts rose 2.3 percent.

The Commerce Department said orders for durable goods — manufactured products expected to last three or more years — fell 0.5 percent, less than initially estimated.

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Durable goods orders excluding transportation were up a revised 1.1 percent, stronger than the initial report in November. Orders for non-defense capital goods, excluding aircraft, fell 0.8 percent, less than originally reported.