Service sector shrinks for first time since Great Recession

The coronavirus pandemic caused the U.S. service sector to contract in April for the first time since December 2009, according to the Institute for Supply Management.

The Institute said Tuesday that its service-sector index declined to 41.8 in April from 52.5 in March. Any index below 50 indicates shrinking, according to The Associated Press. The last time the sector was in contraction was in December 2009, and the April 2020 reading is the lowest since March 2009.

The Institute’s April index found a drop in all major categories, including the business activity index, which fell to an all-time low of 26, while the new orders index declined to 32.9 and the employment index fell to 30. Only two service sector industries experienced growth in the past month: finance/insurance and public administration.

Sixteen other industries reported declines.

The survey also found increased challenges in the agriculture sector, reporting that milk prices haven fallen 29 percent over a period of a few weeks. The ISW said loss of markets and demand has in some cases driven farmers to dump milk. The manufacturing sector, too, is reported to be in contraction, with a reading of 41.5 for April.

The Congressional Budget Office, meanwhile, has projected that the current April-June quarter will see the overall economy falling by a record annual rate of 40 percent.

While numerous states have begun gradually reopening or are set to begin the process in the weeks ahead, numerous surveys indicate Americans plan to voluntarily avoid crowded spaces even after they reopen, and some economists have suggested economic woes may continue until a vaccine is available.

“Social distancing measures are being gradually lifted, but it will take time to undo the economic damage,” Oren Klachkin, lead U.S. economist at Oxford Economics, told the AP. “Significantly weaker demand, supply chain disruptions … and uncertainty over the virus’s trajectory will pose considerable headwinds to an economic rebound.”