American service companies expanded in March at the slowest pace in five months, adding to signs of tepid economic growth in the first quarter, a survey by the Institute for Supply Management has found.
The Institute for Supply Management (ISM) said its index of non-manufacturing activity fell to 55.2 from 57.6 in February. The index in February had been at its highest level since October 2015. It has signaled overall expansion for 87 consecutive months, since the beginning of 2010.
The March reading was below expectations of 57.0 from a Reuters poll of 64 economists.
A reading above 50 indicates expansion in the service sector and a reading below 50 indicates contraction.
The business activity index fell to 58.9 from 63.6 the month before. That was below expectations of 61.5. The employment index fell to 51.6 from 55.2 a month earlier. New orders dropped to 58.9 from 61.2. The prices paid index fell to 53.5 from 57.7.
A disappointing start to the year for Americans’ spending could be to blame for the drop in the ISM index, as softer consumption in the first quarter has been a common theme in the last three years, Bloomberg reported.
While the figure remains above its 2016 average, the decline represents some easing following the big gains in so-called soft data, such as surveys and confidence indicators, since Donald Trump’s election. Services account for about 90 percent of the economy and span industries such as utilities, retailing, health care, and construction.
The decline in the services employment gauge is also a potentially negative indicator for Friday’s payrolls report, which is forecast to show the U.S. added 175,000 jobs added in March following February’s gain of 235,000. To be sure, figures from ADP Research Institute showed private payrolls climbed by 263,000 in March, the most since December 2014.
A separate index on manufacturing eased in March to 57.2, according to a report released Monday by the Tempe, Arizona-based ISM. That still represents a robust pace of growth for America’s factories and demonstrates momentum in an industry that struggled for the better part of the last two years.
The postelection euphoria among businesses is now shadowed by uncertainty over the outlook for trade, health care and immigration policy, Anthony Nieves, who oversees the ISM survey, told the Wall Street Journal. “We’re seeing a little bit of waning only due to that uncertainty,” he said. “Over the course of time, we’ll see how this pans out.”
(Newsmax wires services the Associated Press, Bloomberg and Reuters contributed to this report).
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