US services sector activity slows; private payrolls rise solidly

WASHINGTON: US services sector activity slowed in March, held down by a drop in new orders, while private employers maintained a brisk pace of hiring. The Institute for Supply Management (ISM) said on Wednesday its non-manufacturing activity index fell 0.7 point to a reading of 58.8 last month. A reading above 50 indicates expansion in the sector, which accounts for more than two-thirds of US economic activity.
March’s moderation in services industry activity reflected a 5.3 points decline the new orders subindex. The ISM’s employment measure increased 1.6 points. There were also increases in the backlog of orders and import measures last month.
Separately, the ADP National Employment Report showed private payrolls increased by 241,000 jobs in March after rising 246,000 in February. Last month’s increase beat economists’ expectations for a 205,000 gain.
The ADP report, which is jointly developed with Moody’s Analytics, was published ahead of the government’s more comprehensive employment report for March due on Friday.
According to a Reuters survey of economists, nonfarm payrolls likely increased by 195,000 in March after surging 313,000 in February. The unemployment rate is forecast falling one-tenth of a percentage point to 4.0 per cent in March. US financial markets were little moved by the data as investors fretted over escalating trade tensions between the United States and China.
The dollar was trading lower against a basket of currencies. Stocks on Wall Street fell while prices for longer-dated US Treasuries rose.
In a third report the Commerce Department said factory goods orders increased 1.2 per cent in February amid strong demand for transportation equipment and a range of other products, nearly unwinding January’s revised 1.3 per cent decline. Orders surged 7.9 per cent on a year-on-year basis in February.
Manufacturing, which accounts for about 12 per cent of US economic activity is being supported by strong domestic and global demand, but a shortage of skilled workers and capacity constraints could hurt factory output.
A survey on Monday showed a slight ebb in sentiment among manufacturers amid rising concerns over labour shortages and the supply chain. Manufacturers also reported that tariffs on steel and aluminium imports imposed by President Donald Trump in early March were raising prices, “causing panic buying” and “leading to inventory shortages for non-contract customers.”
Trump imposed 25 per cent tariffs on steel imports and 10 per cent for aluminium to shield domestic industries from what he has described as unfair competition from other countries. Orders for transportation equipment soared 7.0 per cent, lifted by a 26.2 per cent jump in the volatile orders for civilian aircraft. There were also increases in orders for machinery, which rose 1.2 per cent after slipping 0.2 per cent in January. — Reuters