Amer­i­can ser­vice firms grow at slightly slower pace in March


U.S. ser­vice firms ex­panded at a slightly slower yet still healthy pace in March, an en­cour­ag­ing sign af­ter mul­ti­ple re­ports last week pointed to a slow­ing econ­omy.

The In­sti­tute for Sup­ply Man­age­ment said Mon­day that its ser­vices in­dex slipped to 56.5 last month, from 56.9 in Fe­bru­ary. Any read­ing over 50 in­di­cates ex­pan­sion.

A mea­sure of sales fell last month and dragged down the over­all in­dex. But gauges of hir­ing and or­ders rose, ev­i­dence that ser­vices firms may see solid growth in the com­ing months.

That sug­gests that re­cent signs of a weak­en­ing econ­omy could prove tem­po­rary. The ser­vices fig­ures come af­ter a dis­ap­point­ing jobs re­port last week, which echoed a slew of other weak eco­nomic data this month. Em­ploy­ers added just 126,000 jobs in March, the fewest in 15 months.

Many an­a­lysts now fore­cast that the econ­omy barely ex­panded in the first three months of this year.

Growth has slowed dramatically in the last six months. Man­u­fac­tur­ing pro­duc­tion has fallen as the strong dollar has raised the price of Amer­i­can goods over­seas, hurt­ing ex­port sales. Cheaper oil has also caused drilling com­pa­nies to cut back on their or­ders of steel pipe and other equip­ment.

The ISM is a trade group of pur­chas­ing man­agers. Its sur­vey of ser­vices firms cov­ers busi­nesses that em­ploy 90 per­cent of the Amer­i­can work­force, in­clud­ing re­tail, con­struc­tion, health care and fi­nan­cial ser­vices com­pa­nies.

The ISM’s man­u­fac­tur­ing in­dex, re­leased last week, fell for the fifth straight month in March.

Home con­struc­tion has been weak de­spite low mort­gage rates. And Amer­i­cans are still cau­tious about spend­ing, even with a sharp plunge in gas prices since last June.

Growth has fal­tered as a re­sult. The econ­omy ex­panded at a 2.2 per­cent an­nual rate in the fi­nal three months of last year, down sharply from a blis­ter­ing 4.8 per­cent in the six months from last April through Novem­ber.

Most an­a­lysts ex­pect it slowed even fur­ther in the Jan­uary- March quar­ter. Harsh win­ter weather may have been partly to blame. But pay­checks are still barely keep­ing up with in­fla­tion, even as the un­em­ploy­ment rate has fallen. That is likely weigh­ing on spend­ing and growth.

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