Indiana Grain Company, LLC

Posted: 07/05/10

By: tomgrisafi

Much of the economic data out recently has suggested that the economy has hit an air pocket, but the calendar of releases for this holiday-shortened week will be very light, though one piece of data on Tuesday could confirm how much turbulence has bufeted the recovery.

Manufacturing has been roaring ahead, as companies have been trying to replace depleted stockpiles caused by the near shuttering of production lines in late 2008 and early 2009. Modest increases in demand and growth in Asia have also fueled gains.

However, manufacturing makes up just a small slice of overall economic activity. Non-manufacturing businesses create most of the jobs and are responsible for much of GDP.

Tuesday's release of the ISM Non-Manufacturing Index, which is an excellent gauge of economic activity for the service sector, should provide a good indication of just how close the economy might be toward tipping into a double dip recession.

Economists surveyed by Bloomberg expect the index to fall from 55.4, which has been its level for three-consecutive months, to 55.0. A reading of 50 marks the line between expansion and contraction.

At 55.0, the index would be signaling a very slight slowdown in service activity. Still, such a reading would be in indication that a modest recovery is still in place, but not one that is about to unleash a new round of hiring in the private sector.

In the meantime, weekly jobless claims will be out on Thursday. Jobless claims have been stuck in a high range, suggesting that many companies continue to shed jobs in the uncertain economic environment.