A Key Signal Of Strength At A Pivotal Moment In Economic History

It is a pivotal moment in economic history. The dust is settling from the economic shock caused by the Covid-19 pandemic. Meanwhile, the post-pandemic inflation crisis and Russia-Ukraine War linger on, creating stock market uncertainty, fueling fears of an economic downturn, and, in some quarters, of a worldwide financial disaster. So, the latest data on the service sector of the U.S. economy is indeed reassuring.

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Amid considerable gloom and doom, the index of business activity in the service sector, which accounts for 89% of U.S. gross domestic product, ticked up in August to 56.9%. No collapse is underway. Far from it, the pace of business activity in the service sector is in line with the rate averaged in the last expansion, the 11-year boom that began in April 2009 and ended when Covid hit in February 2020.

In addition, the new orders index, a forward-looking sub-component of the purchasing managers index maintained by the Institute of Supply Management (ISM), an association for purchasing management professionals, came in at 61.8%.

A private-sector institution that conducts the surveys of purchasing managers monthly, ISM began publishing the service sector index in 2008. It’s constructed using the same methodology as ISM’s index of the manufacturing sector, which has been published for many decades and is a valuable metric of current activity in the manufacturing economy. ISM says a reading of more than 50% indicates that the services sector economy is generally expanding; below 50% indicates that it is generally contracting.

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The Standard & Poor’s 500 stock index closed Friday, September 9, 2022, at 4,067.36. The index gained +1.53% from Thursday and +3.58% from last week. The index is up +58.05% from the March 23, 2020, bear market low and down 16.45% from the January 3rd all-time high.

The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. It is a market-value weighted index with each stock’s weight proportionate to its market value. Index returns do not include fees or expenses. Investing involves risk, including the loss of principal, and past performance is no guarantee of future results. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance quoted.   ​​

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This article was written by a professional financial journalist for Advisor Products and is not intended as legal or investment advice.

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