SOURCE: Rothman Research

Rothman Research

June 14, 2010 08:37 ET

A Bird's Eye View of the Services Industry

JOHANNESBURG, SOUTH AFRICA--(Marketwire - June 14, 2010) -  www.rothmanresearch.com -- For the last 20 years the U.S. service sector's importance within the economy has been on a tear as it continues to increase its size to a colossal chunk of the U.S. gross domestic product (GDP) -- taking about 70% of the U.S. economic activity. In recent decades the servitization of products has toppled the once significant role of the manufacturing sector's contribution to the GDP, as more and more products nowadays brings their share of service factor. This does not mean that the manufacturing sector plays a less vital role, but it simply underlines that key sectors might be paralyzed if the services sector was not providing the services to these sectors. The service sector encompasses key industries like retail, information, professional, technical and scientific services with the retail and wholesale industry taking the lead followed by insurance and finance related services. Despite the negative impact of the recent economic crisis on the service sector, current research by the Institute for Supply Management indicates that services grew for the fifth uninterrupted month in May.

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One company within the service sector planning to pull its act together as the Soccer World Cup begins to drag thousands of fans to South Africa where the event is been played and push million others to squat their TV rooms for at least a full month is Visa Inc. (NYSE: V). The retail electronic payments provider has freshly reported a surge of 15% in May for its processed transactions on its electronic payments network which was welcomed by investors. This positive news came as a breather for Visa as the company has been experiencing a sell-off spree in the last two months due to fear that the U.S. Senate introduction of amendments onto larger financial reform bill could impact negatively on the profitability of Visa if the bill is passed into law. Visa is not the only company biting its nails over this proposed regulation. MasterCard Inc. (NYSE: MA) also finds its business practice over the debit interchange fees under scrutiny. 

*Free downloadable research reports on Visa Inc. and Mastercard Incorporated are available by signing up now at http://www.rothmanresearch.com/article/v/23580/Jun-14-2010.html or http://www.rothmanresearch.com/article/ma/23582/Jun-14-2010.html

At the end of last week, a key data released by the Department of Commerce has somewhat disrupted the ongoing optimism regarding the U.S. economic recovery. The report indicated a tumble of retail sales in May. Consumer spending is a crucial indicator of economic growth or economic contraction. The recorded drop in retails sales is the largest one since September 2009. Whilst trading session last Friday seemed to be doomed to close in the red, it remarkably settled with small gains across the different major indexes.

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