US service sector activity index hits record high in March

[WASHINGTON] A measure of US services industry activity surged to a record high in March amid robust growth in new orders, in the latest indication of a roaring economy that is being boosted by increased vaccinations and massive fiscal stimulus.

The upbeat survey from the Institute for Supply Management (ISM) on Monday followed news on Friday that the economy added 916,000 jobs in March, the most in seven months. Economic growth this year is expected to be the strongest in nearly four decades.

"Vigorous services activity in March sets the stage for robust expansion in the second quarter," said Oren Klachkin, lead US economist at Oxford Economics in New York. "All the right pieces for a faster services recovery - expanded vaccine eligibility, reopenings, and historic fiscal expansion - are falling into place." The ISM's non-manufacturing activity index rebounded to a reading of 63.7 last month also due to warmer weather. That was the highest in the survey's history and followed 55.3 in February.

A reading above 50 indicates growth in the services sector, which accounts for more than two-thirds of U.S. economic activity. Economists polled by Reuters had forecast the index rising to 59.0 in March.

The ISM said comments from services industries indicated that "the lifting of Covid-19 pandemic-related restrictions has released pent-up demand for many." It, however, noted that"production-capacity constraints, material shortages, weather and challenges in logistics and human resources continue to cause supply chain disruption." The survey added to a raft of reports from manufacturing to consumer confidence and employment in suggesting that the vastly improved public health situation and the White House's US$1.9 trillion Covid-19 pandemic rescue package were providing a powerful tailwind to the economy.

The ISM reported last week that its measure of national manufacturing activity soared to its highest level in more than 37 years in March. The services industry, hardest hit by the pandemic, could accelerate further as the economy re-opens.

REUTERS