Economic Report
Aug 5, 2009, 10:57 a.m. EST

Non-manufacturing industries worsen in July, ISM says
ISM index falls to 46.4% in July, as orders and production fade

By Rex Nutting, MarketWatch
WASHINGTON (MarketWatch) -- U.S. non-manufacturing industries contracted for the 10th consecutive month in July, the Institute for Supply Management reported Wednesday.

The ISM non-manufacturing index fell to 46.4% in July from 47% in June.

Economists surveyed by MarketWatch expected a small increase to 48%. The index had risen three months in a row. The index bottomed at 37.4% in November.

Readings under 50% indicate that most firms say business is still getting worse, or at least not getting better. The index has been below 50% for 10 straight months.

Seven of 18 industries were growing in July, led by real estate, entertainment and agriculture. "The majority of respondents' comments reflect a sense of uncertainty and cautiousness about business conditions," ISM said.

"While clearly signaling economic conditions that are nowhere near as bad as late last year and earlier this year, the level of the overall index remains consistent with basically stagnant conditions," wrote Joshua Shapiro, chief economist for MFR Securities.

"Firms are waiting to reevaluate the economic landscape before undertaking any new hiring or business investment," wrote Omair Sharif, an economist for RBS Securities.

"The recovery was never going to be a straight-line process, so while this report is disappointing, we would view it as a temporary pause on the way to renewed growth later this year."

The new orders index fell to 48.1% from 48.6%. The business activity (production) index fell to 46.1% from 49.8%. The prices-paid index dropped to 41.3% from 53.7%. The employment index fell to 41.5% from 43.4%.

Rex Nutting is Washington bureau chief of MarketWatch.


http://www.marketwatch.com/story/non-ma ... 2009-08-05