Service sector shrinks in October
Purchasing managers say non-manufacturing business at lowest point ever in 10-month history of retooled report.
NEW YORK (CNNMoney.com) -- The nation's service sector contracted in October, falling to the lowest reading in the retooled report's 10-month history, according to a survey of industry executives released Wednesday.
The Institute for Supply Management's (ISM) non-manufacturing index fell to 44.4 from 50.2 in September. Economists were expecting a reading of 47, according to a consensus compiled by Briefing.com.
In January, the index was 44.6.
A reading above 50 indicates growth in the sector, and a reading below represents decline in the sector. The reading had been at the 50-mark, the so-called "boom-bust line," for most of the year.
According to Ian Shepherdson, economist at High Frequency Economics, the report is "horrible," but "only to be expected in the wake of the equity plunge and the subsequent collapse in confidence," he wrote in a note.
The greatest contraction occurred in business activity and production, which fell to 44.2 in October from 52.1 in September.
The new orders index also reversed from growth to contraction, decreasing to 44 from 50.8 last month.
The employment index continued contracting, dropping to 41.5 from 44.2 the month before.
A private outplacement firm reported the highest number of pink slips handed out since January 2004 last month. The job cut announcements soared to 112,884, up 19% from September's 95,094 cuts, according to Challenger, Gray & Christmas Inc.
Anthony Nieves, chairman of ISM's Non-Manufacturing Business Survey Committee, noted that the prices business owners must pay for materials and services continued to climb, but at a slower rate.
Prices fell 16.6% to 53.5 in October from 70 the month before.
Supplier deliveries fell 5.5% to 48.0 from 53.5 the month prior.
Crude oil prices have fallen more than 50% from the record high of $147.27 a barrel set in mid-July.
In a separate report released Monday, a key index of the nation's manufacturing activity fell to a 26-year low, sliding into recession territory, according to ISM.
Last week, the broadest measure of the nation's economy suffered its biggest decline in seven years. The GDP fell at an annual rate of 0.3%. That compared with a 2.8% growth rate in the second quarter, when growth was boosted by economic stimulus checks and strong exports.
The ISM non-manufacturing index was reformulated in January to a composite index, taking into account business activity, new orders, employment and supplier deliveries. Prior to January, the report surveyed only business activity.
Did you vote for Obama? How do you think the new president will affect your wallet? What do you think Obama needs to do to fix the economy - both in the short run and the long term? What should be first on the new Congress's agenda? E-mail us your thoughts, including your name, photo and contact info; the best answers will be featured in an upcoming CNNMoney.com article. 
