The article mainly talked about the fact that growth in the service sector accelerated in February to its fastest pace in recent two years. According to Institute of Supply Management, its index measuring service industry activity rose to 53 from 50.5 in the January. Since service sector accounts for nearly 80% of jobs in US, its growth will lead to growth of the whole economy. This news is also very encouraging given that retail and construction sectors were affected by the severe winter storms. Although the recovery is still disappointing at this point, the fast growth of service sector indicates that the economy is getting better at a faster pace. At the same time, the article pointed out that February is the 26th consecutive month of shrinking jobs. But this is maybe the point that the companies could begin to hire people again.
When the banks regain their confidence and start ledning and investing the money they were given (to do just that), we will see a sizeable recovery in the economy. With interest rates so low, the Fed wants banks to lend out the money, to borrow money themselves.
ReplyDeleteIf the snow has had a significant effect on gorwth in February, I'm excited to see what happens in the next few months when snow is no longer an issue.
I have come across many articles that attribute less than positive economic indices to the affects of the severe storms across the country and I think it is optimistic to believe that we will see higher growth rates as we enter the warmer season. I still believe though that until the retail sector starts picking up, banks will be hesitant to lend out money because the commercial loan theory of banking suggests that banks are most comfortable lending out money to firms in retail or commerce.
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