Like Manufacturing Growth, Non-Manufacturing Slows

Business activity in the non-manufacturing sector of the U.S. economy -- a group that includes mining, construction, finance, transportation and communications -- increased for the thirty-fourth consecutive month in January. But like the economy's manufacturing sector, it grew more slowly than in December 2005, according to data released Feb. 3 by the Institute for Supply Management (ISM), Tempe, Ariz.

ISM's business activity index for non-manufacturing was at 56.8% in January, 4.2 percentage points lower than December 2005's 61%. A figure above 50% indicates the non-manufacturing sector generally is expanding; a figure below 50% signals that it is contracting.

Both new orders and employment among non-manufacturers increased in January, although at a slower rate than in December of last year. The new orders index was 56% in January, down 6.2 percentage points from December's 62.2%. The employment index was 51.1% in January, down 5.8 percentage points from 56.9% in December.

"The overall indication in January is continued economic growth in the non-manufacturing sector, but at slower rates of increase," says Ralph G. Kauffman, chair of ISM's non-manufacturing business survey committee and coordinator of the Supply Chain Management Program at the University of Houston-Downtown.

As ISM was releasing data for non-manufacturing, the U.S. Commerce Department was reporting that factory orders in December were a seasonally adjusted $415.1 billion, a 1.1% increase from November's mark of $410.6 billion and the highest since 1992. The biggest percentage increase came in machinery, up 6.5%.

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