US services sector activity slows more quickly-than-expected in March, ISM says
By Alexander Bueso
Date: Wednesday 03 Apr 2019
(Sharecast News) - Economic activity in the States slowed more quickly-than-expected outside of manufacturing last month, as growth in levels of output and new orders fell back, but a gauge of employment continued to point to a monthly pace of non-farm payrolls growth of roughly 200,000, according to economists.
The Institute for Supply Management's non-manufacturing Purchasing Managers' Index, the bulk of which is accounted for by services, fell from February's level of 59.7 to 56.1 in March.
Economists had forecast a reading of 58.0.
Output growth slowed the most, with the corresponding sub-index retreating from 64.7 to 57.4, while a sub-index linked to new orders slipped from 65.2 to 59.0.
New exports orders also slowed, with a sub-index tracking them dipping by 2.5 points to 52.5, although another linked to order backlogs increased by 1.0 point to 56.5.
The rate of increase in the prices paid by firms on the other hand accelerated, with that sub-index gaining from 54.4 to 58.7.
According to Ian Shepherdson, chief economist at Pantheon Macroeconomics, the headline ISM services index was a bit stronger than the level implied by other economic data, such as core retail sales.
But both the ISM gauge and other indicators such as core retail sales or the weekly chainstore sales numbers from Redbook were all in a state of flux as the economy transitioned away from 2018's "unsustainable", tax cut-induced strength, he said.
"[But] When the dust settles over the next couple of months, we expect to see Q2 consumption running at 2.5%-plus, with Redbook and official non-auto sales rising by about 4.5% nominal, and the ISM non-manufacturing index back up to 58 or so," Shepherdson explained.
As for employment, March's 55.9 reading on the survey's sub-index for employment, which rose from 55.2 for February, was "consistent with payroll growth of just over 200K in late spring; it tends to lead by a couple of months or so."
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