Economy on the Skids
For the first time in nearly than five years, a leading indicator known as the ISM's service sector index, fell...and it fell hard. Investors had been expecting a reading of close to 50, with anything below 50 indicating a decline in the services industry. Instead, they were presented with more evidence to support that sinking feeling that a recession is here. The index came in at 44.6%...lower than the depths of the last recession, back in 2001.
So what does this mean? In the United States, two thirds of our economy is in the service industry. The service industry, be it information technology, the transportation and sale of goods, food services, etc, is the mainstay of American business. If this sector hit a brick wall, as it seems to have done, we're in trouble. The preliminary numbers for the last quarter of 2007 are that the economy only grew by 0.6%. When you combine the last quarter's growth with the ISM's numbers today, unless this is a brief blip, we are going to see a decline in production during the first quarter of 2008. Two quarters of shrinking production and you have an official recession.
I think the scales tipped a bit from the 50-50 chance of recession to something more like 65-35, and the odds are against continuing this streak of prosperity.
So what does this mean? In the United States, two thirds of our economy is in the service industry. The service industry, be it information technology, the transportation and sale of goods, food services, etc, is the mainstay of American business. If this sector hit a brick wall, as it seems to have done, we're in trouble. The preliminary numbers for the last quarter of 2007 are that the economy only grew by 0.6%. When you combine the last quarter's growth with the ISM's numbers today, unless this is a brief blip, we are going to see a decline in production during the first quarter of 2008. Two quarters of shrinking production and you have an official recession.
I think the scales tipped a bit from the 50-50 chance of recession to something more like 65-35, and the odds are against continuing this streak of prosperity.
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