U.S. Non-Manufacturing Growth Slows

As in the manufacturing sector, the pace of growth of the non-manufacturing sector of the U.S. economy slowed some in January, according to figures released Feb. 3 by the Institute for Supply Management (ISM) in Tempe, Ariz. ISM's index of non-manufacturing business activity slipped to 59.2% in January, down 4.7 percentage points from December 2004's figure of 63.9%. New orders increased at a slower rate in January than in December, as did employment. Order backlogs began falling.

A figure above 50% indicates the non-manufacturing sector of the economy generally is growing; a figure below 50% suggests it is contracting.

The "most troubling" development, says Ralph G. Kauffman, is the drop in order backlogs, the first in 21 months. "This implies that the capability to provide products and services in the non-manufacturing industries has risen faster than the increase in new orders," explains Kauffman, chair of ISM's non-manufacturing business survey committee and coordinator of the purchasing and supply management program at the University of Houston-Downtown.

The index of business activity is based on data from about 370 purchasing and supply executives in the non-manufacturing sector, a segment of the U.S. economy that includes, among other categories, construction and mining.

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