Growth in U.S. service sector activity slowed by much more than expected in the month of March, the Institute for Supply Management revealed in a report released on Wednesday.
The ISM said its services PMI slid to 51.2 in March from 55.1 in February. While a reading above 50 still indicates growth in the sector, economists had expected the index to show a much more modest decrease to 54.5.
The bigger than expected decrease by the headline index was partly due to a significant slowdown in the pace of new orders growth, with the new orders index tumbling to 52.2 in March from 62.6 in February.
The employment index also fell to 51.3 in March from 54.0 in February, while the business activity index edged down to 55.4 from 56.3.
The report also showed the prices index dropped to 59.5 in March from 65.6 in February, indicating a slowdown in the pace of price growth.
“There has been a pullback in the rate of growth for the services sector, attributed mainly to (1) a cooling off in the new orders growth rate, (2) an employment environment that varies by industry and (3) continued improvements in capacity and logistics, a positive impact on supplier performance,” said Anthony Nieves, Chair of the ISM Services Business Survey Committee.
On Monday, the ISM released a separate report showing manufacturing activity in the U.S. contracted at a slightly faster rate in the month of March.
The ISM said its manufacturing PMI dipped to 46.3 in March from 47.7 in February, with a reading below 50 indicating a contraction. Economists had expected the index to edge down to 47.5.
With the bigger than expected decrease, the manufacturing PMI dropped to its lowest level since hitting 43.5 in May 2020.
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