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US service sector expansion was moderate in March, returning to its slowest pace for more than a year.
The Supply Management Institute (ISM) non-manufacturing index released Wednesday fell to 56.1 last month, its lowest level since August 2017. It was down 59.7 in February and close two points below the 58.0 expected.
Reuters
Despite the decline in March, the 12-month moving average of the overall index, at 58.5, is comfortably expanding. Readings greater than 50 indicate growth.
New orders, an important indicator of future activity, lost 6.2 points, from 65.2 to 59.0. In February, the index jumped 7.5 points from 57.7 in January. The measure of business activity also fell sharply from 64.7 to 57.4, which is lower than the consensus forecast of 61.5.
Employment was an exception to the downward trend. The index rose from 55.2 to 55.9 in March, although it still remains well below its peak in 2018, at 60.4.
Reuters
The ISM services report tracked employment data released by ADP, a private payroll firm, weaker than expected. Businesses added 129,000 jobs in March, well below the 170,000 forecasts and the revised total of 197,000 in February.
The non-farm payroll increased by only 20,000 in February, much lower than the forecast 180,000 and the total 311,000 January. The March non-farm payroll will be issued this Friday at 8:30 am and the EDT at 12:30 GMT, 180,000 new positions are expected.
The ISM manufacturing survey conducted by Compan for the month of March gave a different picture. The main index rose from 54.2 to 55.3. New orders climbed from 55.5 to 57.4 and the employment index from 52.3 to 57.5.
The manufacturing sector is generally regarded as a leading indicator for the economy as a whole. Its more complex procurement and production processes and longer lead times give a deeper insight into future economic activity. The recovery of the factory indicators is probably a better sign of the direction taken by the economy than the more responsive non-manufacturing index.
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