Service sector growth in the U.S. unexpectedly slowed in the month of March, the Institute for Supply Management revealed in a report released on Wednesday.
The ISM said its services PMI dipped to 51.4 in March from 52.6 in February. While a reading above 50 still indicates growth in the sector, economists had expected the index to inch up to 52.7.
The unexpected decrease by the headline index partly reflected a slowdown in the pace of growth in new orders, with the new orders index falling to 54.4 in March from 56.1 in February.
The report also showed a continued contraction in employment in the service sector, although the employment index inched up to 48.5 in March from 48.0 in February.
The business activity index also crept up to 57.4 in March from 57.2 in February, indicating a slight acceleration in the pace of growth.
On the inflation front, the prices index tumbled to 53.4 in March from 58.6 in February, suggesting a notable slowdown in the pace of price growth.
“The Prices Index reflected its lowest reading since March 2020, when the index registered 50.4 percent; however, respondents indicated that even with some prices stabilizing, inflation is still a concern,” said Anthony Nieves, Chair of the ISM Services Business Survey Committee.
The ISM released a separate report on Monday unexpectedly showing modest growth in U.S. manufacturing activity in March following sixteen consecutive months of contraction.
The report said the manufacturing PMI jumped to 50.3 in March from 47.8 in February, with a reading above 50 indicating growth in the sector. Economists had expected the index to inch up to 48.4.
With the much bigger than expected increase, the index returned to expansion territory for the first time since September 2022.
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