Wednesday, July 25, 2012

Where We Are: Services

From the Beige Book:
Demand for nonfinancial services was generally stable to slightly stronger since the previous report. Richmond noted that revenue improvement was strong among professional, scientific, and technical firms. Strength in energy, legal, and audit-related services was noted in the Dallas District. Advertisers in the Philadelphia and San Francisco Districts reported strong revenues, and consulting and advertising contacts in the Boston District noted steady activity. Richmond and San Francisco reported that restaurants were busy, while food service contacts in Atlanta reported that demand had softened a bit.

 Transportation contacts reported that activity was generally positive. In the Atlanta and Dallas Districts, rail contacts reported strong shipments of petroleum and motor vehicles and equipment. The Richmond District reported increases in port activity with container volumes and tonnage at or near record levels. Input from logistics and trucking contacts was mixed. The Cleveland and Atlanta Districts noted softening volumes and less-robust forecasts for the remainder of the year. Kansas City's report cited an uptick in trucking activity, while San Francisco's report cited moderating growth in trucking
Oddly enough, there is actually precious little hard data on the service sector of the economy, save for the ISM services index. 

Overall, we still see readings above 50, indicating expansion.  While the data series has a slightly downward trend to it, it's certainly not fatal.

Let's look at the anecdotal notes from the latest ISM report:
    "General state of business this month is flat, with no changes." (Construction)
    "Business is steady and an increase over last month, as we begin our peak season." (Arts, Entertainment & Recreation)
    "We are starting to experience a slowdown from the modest, grinding improvements our market areas have been experiencing of late." (Finance & Insurance)
    "Patient counts continue to be lower than budget." (Health Care & Social Assistance)
    "Business is still growing, but there has been a definite slowing in growth." (Wholesale Trade)
    "We have noticed a slowing of customer counts and sales over the last 30 to 60 days, compared to the same period last year." (Accommodation & Food Services)
    "Stable business globally, but softening backlog as clients further tighten discretionary spend." (Professional, Scientific & Technical Services)
Notice that most of the comments focus on the slowing overall growth in demand.

While the data is a bit thin to draw strong conclusions, the overall impression is one of a slowing sector.