Fears grow for US service sector

A measure of US service sector activity dropped to a record low in November, showing further weakness in the sector.

The Institute for Supply Management's index fell significantly more than expected to 37.3 in November from 44.4 in October.

The US service sector includes banks, hotels and accountants, and makes up about 80% of US economic activity.

Readings below 50 in the index, which measures business expectations, signal contraction in the sector.

"The severe damage to the service industry is another indication of the extraordinary force of this recession"
Pierre Ellis, Decision Economist

The index was first compiled in the middle of the 1990s.

'Simply frightening'

"It's an extraordinarily steep decline for a measure of service sector activity. It's unusual for the service industry to be as volatile as the manufacturing industry or as volatile as the economy as a whole," said Pierre Ellis at Decision Economist.

"The severe damage to the service industry is another indication of the extraordinary force of this recession," he added.

The National Bureau of Economic Research said on Monday that the US entered a recession in December 2007.

In a statement, the committee said that the "decline in economic activity in 2008 met the standard for a recession".

Paul Ashworth, senior US economist at Capital Economics, called the service sector data "simply frightening".

"The collapse in the US ISM non-manufacturing index... leaves it at a level consistent with a 3% annual contraction in GDP," he said.