18/05/2024 8:35 PM


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US services sector posts biggest contraction since 2009 as coronavirus halts economic activity

A shopper wears a protective mask while browsing through the Island Cotton Company store as the state of Florida enters phase one of the plan to reopen the state on May 4, 2020 in Stuart, Florida.

Joe Raedle | Getty Images

The U.S. services sector contracted for the first time in about a decade last month as the coronavirus pandemic brought economic activity in the country to a near-screeching halt, according to the Institute for Supply Management.

The ISM nonmanufacturing index dropped to 41.8 in April from 52.5 in March, showing the first contraction in services since December 2009. It was also the biggest contraction for the sector since March 2009, when the index hit 40. To be sure, the April print was above a Dow Jones estimate of 40.

April’s sharp decline was driven by the lowest amount of business activity in services since ISM debuted the index in 1997. A steep drop in new orders also pushed the index lower. 

Anthony Nieves, chair of the Institute for Supply Management, said the massive month-over-month drop “was primarily a product of supply problems related to the coronavirus (COVID-19) pandemic.”

“Respondents are concerned about the continuing coronavirus impacts on the supply chain, operational capacity, human resources and finances, as well as the uncertain timelines for the resumption of business and a return to normality,” Nieves said in a statement. 

The coronavirus pandemic led states across the U.S. to implement stay-at-home orders and close down nonessential businesses. This led to a massive wave of layoffs and loss of economic activity. 

More than 26 million Americans have filed for unemployment benefits over the past six weeks, according to data from the Labor Department. U.S. GDP shrank by 4.8{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f} in the first quarter for its steepest contraction since the financial crisis. 

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