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U.S. Services Index Rebounds Slightly More Than Expected In March

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After reporting a slowdown in the pace of growth in U.S. service sector activity over the past few months, the Institute for Supply Management released a report on Tuesday showing growth in the sector reaccelerated in the month of March.

The ISM said its services PMI rose to 58.3 in March from 56.5 in February, with a reading above 50 indicating growth in the sector. Economists had expected the index to rebound to 58.0.

The slightly bigger than expected increase by the services PMI follows three consecutive monthly decreases after the index reached a record high in November.

The rebound by the headline index came as the new orders index jumped to 60.1 in March from 56.1 in February. The business activity index also crept up to 55.5 from 55.1.

The report showed the employment index also rebounded to 54.0 in March from 48.5 in February, indicating job growth in the service sector following a contraction in the previous month.

The inventories index also inched up to 51.7 in March from 50.8 in February, while the supplier deliveries index fell to 63.4 from 66.2.

On the inflation front, the prices index edged up to 83.8 in March from 83.1 in February, reaching its second-highest reading ever behind December's 83.9.

"There was an uptick in business activity in March, but respondents have indicated that they continue to be impacted by capacity constraints, logistical challenges and inflation," said Anthony Nieves, Chair of the ISM Services Business Survey Committee.

"Labor shortages have eased slightly, as COVID-19 cases have declined and public-health restrictions have been relaxed," he added. "Geopolitical concerns — particularly the Russia/Ukraine war, which has impacted material costs, most notably fuel and chemical prices — have created uncertainty for many businesses."

The ISM released a separate last Friday showing manufacturing activity in the U.S. unexpectedly grew at a modestly slower rate in the month of March.

The manufacturing PMI dipped to 57.1 in March from 58.6 in February, while economists had expected the index to inch up to 59.0.

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