NEW YORK (AP) - Data showing an unexpected expansion in the service sector
in April raised hopes that the U.S. economy will be spared a sharp downturn even
though many observers feel it is already in a mild recession.
Some analysts saw the report, coupled with Friday's better-than-expected
job-loss numbers, as a sign the economy could muddle along, neither growing or
declining dramatically.
"I don't see anything that indicates that activity is strong, I don't see
anything that indicates it's very weak. We're teetering on the zero line," said
Dan Meckstroth, chief economist of the Manufacturers Alliance, a trade group.
Others cautioned that Monday's service sector report by the Institute of
Supply Management may be an aberration, since it deviated from data showing
continued weakness in employment, automobile sales and chain-store sales.
The trade group's index of the service sector showed a better-than-expected
reading of 52 for April, up from 49.6 in March. Wall Street economists surveyed
by Thomson Financial/IFR had expected a reading of 49.3.
The index had been below 50 for the previous three months. A reading above
50 indicates the sector is growing, while a reading below 50 indicates
contraction.
Citigroup Inc. economist Steven Wieting said he took the reading with a
grain of salt, saying the services report the group puts out "has a much more
limited history" than its long-running and important manufacturing index.
"Some of the industries that showed up in the 'improving' column were
construction and real estate," Wieting said. "I'm sure we're going to see that
someday. I'd just like confirmation."
Still, the data matched his expectations that the recession would be
shallow.
Twelve industries reported growth, including real estate, agriculture,
wholesale trade, public administration and education. The six that reported
contraction included transportation, hotels and health care.
The services sector accounts for almost 80 percent of the nation's economy.
The services index fell steeply in January to 44.6, its first drop below 50
since March 2003, and was below 50 in February and March.
The Institute for Supply Management's recent reading of the manufacturing
sector contracted in April, stalled near its lowest level in five years.
At Berkshire Hathaway Inc.'s annual meeting Sunday, the company's
billionaire chairman Warren Buffett reiterated that the current economy meets
his definition of a recession: When most people and businesses are not doing as
well as they were three, six or nine months ago.
"I would say that we're in a recession clearly," Buffett said.
Stocks, which traded lower when Monday's service-sector reading was
released, dropped further as oil topped $120 a barrel. In afternoon trading, the
Dow Jones industrial average was down 94.85, or 0.73 percent, to 12,963.35. The
Standard & Poor's 500 index was down 7.17 to 1,406.73 and the Nasdaq composite
index fell 15.52 to 2,461.47.
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