ISM Report Shows Services Sector Expanded Slower than Expected in March

Andrew Klips  |

The Institute for Supply Management said on Wednesday that the service sector expanded at a slower rate than expected in March, growing at its slowest pace since in five months. The ISM report, which surveys purchasing and supply executives across the country, dipped to 54.4 percent in March from a 12-month high of 56 percent in February.

Readings over 50 signal that more services companies expanded during the month than contracted. It was the 39th consecutive month that the ISM Non-Manufacturing Index scored above 50 percent.

Economists were anticipating a slight dip from February to a 55.8 percent mark.

15 of the 18 service industries reported growth during March, up from 13 in February. Construction and Management of Companies & Support Services paced the gainers.

Subindexes also generally showed expansion for the month, but at a slower pace than February. Only the Import Index (+1.5 percentage points) and Supplier Deliveries Index (up 5.0 percentage points) expanded at a faster pace than the month prior.

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The Non-Manufacturing Business Activity Index came in at 56.5 percent for March, down from a 56.9 percent reading the month earlier, but representing the 44th straight month of growth.

The New Orders Index fell from 58.2 percent to 54.6 percent, while the Employment Index dropped from 57.2 percent to 53.3 percent. It was the eighth straight month that employment showed growth, albeit at the lowest level since November.

The Prices Index faded from 61.8 percent to 55.9 percent, signaling that prices are still increasing, just not as fast as the month earlier.

Inventories recorded a reading of 51.5 percent. Inventories were at 54.0 percent in February after falling into contraction levels of 47.0 to start the year.

“The majority of respondents' comments continue to be positive about business conditions; however, there is an underlying concern regarding the uncertainty of the future economy,” said the report issued by Anthony Nieves, chair of the Institute for Supply Management.

The markets broadly started Wednesday’s trading in the green, but following ADP reporting that fewer private jobs than expected were created last month and then the ISM services data, Wall Street shifted gears downward. As the morning session wears one, the Dow Jones Industrial Average is down by 52 points, the S&P 500 has slipped 9 points and the tech-heavy Nasdaq is lower by 12.

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