US services sector cools in March as labour dries up

[WASHINGTON] The dominant US services sector cooled unexpectedly in March as companies struggled to find qualified workers while production and orders both fell sharply, a private survey showed Wednesday.

The decline from a strong February showed growth in the sector had matched its slowest pace for the past 12 months amid rising costs, according to the Institute for Supply Management, which said companies generally remained upbeat.

ISM's non-manufacturing index fell 3.6 points to a reading of 56.1, a deeper slowdown than economists had expected. Any reading above 50 indicates growth.

Anthony Nieves, chair of ISM's survey committee for the non-manufacturing sector, told reporters the earlier February reading had seemed above trend.

"The question was whether it would be sustainable and that proved not to be the case," Mr Nieves said, adding that there were no signs of recession any time soon.

Business activity fell 7.3 per cent to a reading of 57.4, its biggest one-month drop in about a decade, while new orders fell 6.2 points.

Prices also rose, putting pressure on service providers, but the employment index gained.

Sixteen industries reported growth while two - education services and retail trade - said they contracted.

With unemployment hovering at 50-year lows, survey respondents said they struggled to find enough people to hire.

Hotels, restaurants, transportation and warehousing as well as public administration all complained of scarce labour.

"Locally as construction grows, a shortage of available workers for the industry is occurring for future projects," said a respondent in transportation and warehousing.

Prices for aluminum and steel products, diesel, gasoline, labour, paper and pharmaceuticals all rose, survey respondents said.

But prices for bacon fell.

"All these numbers currently are in a state of flux," said Ian Shepherdson of Pantheon Macroeconomics. In a note to clients, he wrote that consumption was cooling from last year's unsustainable levels, which were powered by the December 2017 tax cuts and a late-2018 dip in fuel prices.

Rising incomes later this year should see the index rise again, Mr Shepherdson said.

AFP