Hard hit in the recession, goods producer lead the way
When the credit markets froze in September 2008, what had been a mild recession quickly turned ugly, and demand throughout the economy plummeted, sending stocks sharply lower and the unemployment rate skyward.
The ISM Manufacturing and Non-Manufacturing Indexes (offered up by the Institute for Supply Management) are monthly surveys of the economic landscape that closely monitor conditions among goods producers and non-goods producers (or service industries), respectively.
As the chart above reflects, manufacturing activity contracted sharply in the second half of 2008. The service sector of our economy, which makes up the lion’s share of activity, was not immune from the recession either, as consumers hunkered down and focused on debt repayment and savings.
Manufacturers were so quick to respond to rising inventories and quickly slashed production, resulting in a severe contraction in the sector. By getting inventories under control, this part of the economy has accelerated much quicker than the service sector and has been crucial in aiding overall GDP.
However, as mentioned above, the service sector accounts for most of the wealth produced in the U.S. Though it was not his as hard by the recession (relatively speaking), it has also been slower to recover. And the more feeble recovery in services continues to cast a long shadow on the recovery.
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