The United States witnessed an unexpected slowdown in its service sector growth during the month of March, as per a report put forward by the Institute for Supply Management (ISM) on Wednesday. Despite predictions for the services PMI to rise to 52.7 from February's 52.6, the ISM has noted a decline to 51.4 in March. Even though a reading beyond 50 signifies sector expansion, the actual downturn in the headline index was unanticipated.
This slight setback can be attributed to a decrease in the rate of new order expansion, with the new order index dropping from February's 56.1 to 54.4 in March. Meanwhile, the service sector continued to see a contraction in employment, albeit at a marginally slower pace, as the employment index increased slightly from 48.0 in February to 48.5 in March.
On a brighter note, the business activity index demonstrated a minor growth acceleration, advancing to 57.4 in March from February's 57.2. However, in the realm of inflation, the prices index significantly dropped from 58.6 in February down to 53.4 in March, indicating a major deceleration in price growth.
Anthony Nieves, Chair of the ISM Services Business Survey Committee, noted that despite the Prices Index hitting its lowest point since March 2020, when it registered at 50.4 percent, the market's apprehension over inflation remains, even as some prices stabilize.
In an ISM report released separately on Monday, the U.S manufacturing activity displayed surprising growth in March following sixteen successive months of contraction. The manufacturing PMI leaped from 47.8 in February to 50.3 in March, defying economists' expectation of a climb to only 48.4.
With this larger than anticipated increase, the manufacturing sector re-entered the expansion territory for the first time since September 2022. This marks a significant development for an industry that has been struggling to gain pace for most of the prior year.
