Service Sector Activity Expands in August

The ISM's Non-Manufacturing index (NMI) broke above the expansion/contraction line to 50.6 in August. Activity in the service sector should slow in tandem with overall economic growth in the second half of the year as domestic demand remains sluggish and credit availability remains restrictive.

NMI Signals Sluggish Growth

• Today's headline NMI is consistent with the sluggish economic growth we are witnessing in most sectors of the domestic economy - particularly finance and homebuilding.
• Current business activity expanded in August while the forward-looking new orders index remains below the key 50 level.

Employment Index Suggests Another Payroll Decline

• For the second straight month, the price index has moderated as input prices, particularly energy prices, have subsided. This trend should continue as domestic & global growth slows.
• The employment index continues to suggest that the recent nonfarm payroll deterioration will continue. Initial claims remain elevated and are consistent with our -97K payroll call.

Wachovia Corporation
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