Services Economy And GDP Intertwined

Services Economy And GDP Intertwined

A country’s economy can be divided into two very broad categories: service and manufacturing. Traditionally, the service economy included anything that didn’t end in a finished product, like hospitality, while the manufacturing industry resulted in the completed production of an item, like a car. But, as customer service becomes increasingly important for all companies, the services sector is making inroads into the manufacturing market.

Services in the developing world
The services economy is also starting to play a bigger role in the GDP of many countries, especially emerging or developing countries. According to Wikipedia, the services sector was responsible for nearly half the economic growth in sub-Saharan Africa in the first five years of the 21st century. It’s contributed significantly to employment in many countries, especially in tourism and retail.

India is also looking to services to boost its economy and employment rate. Rediff Business cites Uday Karmarkar, who is something of a business guru in India and the US. Karmarkar has said that the services sector will be instrumental in growing India’s economy and that it will be ably supported by the emerging information economy. According to Karkarkar, the information economy greatly overlaps the services economy, especially in the telecommunications and education industries.

Services in the first world
The Telegraph reports that the services economy in the US contributes more than half of the total economy, neatly pipping the manufacturing sector. And, it’s growing. Furthermore, employment in the services sector is growing.

Service industries are also growing in the UK, where the Purchasing Managers’ Index recently showed that the sector increased to 53.7. It’s the second increase in a row and has given the country hope that its overall economy is finally starting to recover from the effects of the 2007/2009 recession.

It’s not all roses
Japan, which has had one of the most stable economies throughout the global turmoil, experienced a slight drop in the services sector outlook index. The index is designed to reflect the confidence (or lack thereof) in a particular industry from the people concerned. The fact that those working in the services sector aren’t as optimistic as before might be cause for concern if it continues to drop.

Italy’s service sector is also not as healthy as it could be. The Markit/ADACI Business Activity Index says that output in the services sector dropped to 44.0. This means that the sector has been in a gradual decline for the past 15 months. Unemployment in the sector is increasing. The good news, if it can be considered good, is that the rate of decline seems to be slowing down.

What are the lessons here?
From a layman’s point of view, it appears that the services economy plays a profound role in the overall health of national economies and that its strength lends itself to increased levels of employment and consumer confidence. If you want a healthy economy, you need healthy services.

This guest post was written by Sandy Cosser on behalf of Dynamics Careers, a niche online job portal that specialises in Microsoft Dynamics jobs, including SL jobs for those involved in client services and project management.

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