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The service sector looks reasonably healthy




Activity in the service sector is holding up nicely. In fact, the ISM measure of business activity in the service sector is as strong as it's been since mid-2006. Not much in the way of new hiring, though, with the employment index hovering just under 50 for the past three months.


But there's no sign of deflation coming from the nation's purchasing managers, as this next chart shows. On balance, about two-thirds of those surveyed report paying higher prices. (Clarification: deflation is properly defined as a decline in the general price level. That prices may be falling in some areas of the economy is not deflation, since that represents a change in relative prices: some prices are always rising and falling relative to each other as market conditions change. When a clear majority report paying higher prices, though, we do not have deflation.)

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