Activity outside of the manufacturing sector slowed a bit in March, but at 56.5, the index indicates the economy remains firmly in expansion, and recent headwinds are mainly confined to manufacturing.
Modest Slowdown in Activity, But New Orders Up
- The ISM non-manufacturing index edged slightly lower in March, but at 56.5, still indicates moderate economic growth.
- Although current activity slowed over the month, respondents noted an increase in new orders and backlogs. In contrast to Friday’s reported slowdown in hiring, the employment index ticked up slightly in March. Prices paid rose for the first time in three months, suggesting some firming in inflation.
Larger Service Sector to Keep Growth on Track
- The modest decline in the non-manufacturing index over the past few months indicates that the manufacturing sector is taking the brunt of the dollar’s appreciation and port-related disruptions, while the service sector has been affected much less. On an economy-weighted basis, the ISM indices averaged 55.9 in March and suggest the sub-1 percent print expected for Q1 GDP is likely to overstate the recent slowdown in the economy.
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