While a report released by the Institute for Supply Management on Thursday showed that U.S. service sector activity expanded at a faster rate in March, the index of activity in the sector rose by less than economists had expected.
The ISM said its non-manufacturing index climbed to 53.1 in March after falling to 51.6 in February. A reading above 50 indicates continued growth in the service sector, but economists had been expecting the index to reach a reading of 53.5.
Anthony Nieves, chair of the ISM Non-Manufacturing Business Survey Committee, said, "Despite the affects of weather on many of the respective businesses, the majority of respondents indicate that business conditions are improving."
"The respondents also project better business activity and economic conditions as weather conditions continue to improve," he added.
The report showed a substantial rebound by the employment index, which jumped to 53.6 in March after tumbling to 47.5 in February.
The employment index's move back above 50 points to job growth in the service sector compared to the contraction seen in the previous month.
While the new orders index also climbed to 53.4 in March from 51.3 in February, the business activity index dipped to 53.4 from 54.6.
On the inflation front, the prices index advanced to 58.3 in March from 53.7 in February, indicating a faster rate of price growth.
Peter Boockvar, managing director at the Lindsey Group, said, "Bottom line, economic activity is bouncing back after a tough few months, as it should after a very disruptive winter, but both ISM figures were a touch below estimates."
"The next question that follows is whether the bounce back in activity is sustainable and can be translated into quicker growth than the 2.5%ish we seem to be stuck in," he added. "We hope so but aren't looking for it."
Tuesday morning, the ISM released a separate report showing that activity in the U.S. manufacturing sector expanded at a slightly faster rate in March, although the index of activity in the sector rose by a little less than expected.
The ISM said its purchasing managers index crept up to 53.7 in March from 53.2 in February, while economists had expected the index to climb to a reading of 54.0.
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