- FRED, ISM
The most important part of the US economy – the services sector – made a comeback in March, based on two key reports out Tuesday.
The Institute of Supply Management’s nonmanufacturing index rose to 54.5 from 53.4, topping economists’ forecasts. It was the first increase for the sector in five months.
This print, based on survey responses from industry executives, reflects that the sector grew at a faster rate.
The services sector accounts for almost all of America’s economic output. It started 2016 with a bit of a dud, fueling concerns that the services sector was starting to slow down as manufacturing has.
“The strong ISM non-manufacturing results confirm that the US economy is far from recession,” PNC deputy chief economist Gus Faucher said in a note. “Although energy production is down, and manufacturing is flat, service industries and construction (included in non-manufacturing) continue to do well.”
Markit Economics’ services purchasing managers’ index came in at 51.3, beating the forecast for 51.2.
The report showed that activity in the sector returned to expansion in March.
But the details of this report reflected a very mixed picture and the slowdown that the industry experienced in the first quarter.
For example, new work orders expanded at the slowest rate in the survey’s 6.5-year history. Confidence in the business outlook also declined, to a new post-crisis low.
Markit chief economist Chris Williamson said in the release (emphasis ours):
The welcome news of sustained robust hiring in March, as indicated by both the PMI surveys and non-farm payroll numbers, masks a more worrying picture of a further slowing in economic growth so far this year.
… firms clearly expect worse to come. Firms are worried about a potential weakening of demand both at home and abroad in the face of various headwinds.