US services growth improves as ISM's March gauge climbs to 58.3

[WASHINGTON] Growth at US service providers picked up in March as employment and orders strengthened, indicating the economy is on solid footing despite high inflation.

The Institute for Supply Management's gauge of services increased to 58.3 last month from 56.5 in February, according to data released Tuesday. Readings above 50 signal expansion. The gain was the first in four months.

The group's index of new orders advanced for the first time since October, while a measure of employment jumped by the most since January 2021 as Covid-19 cases declined. A gauge of business activity - which parallels the ISM's measure of factory production - also expanded at a faster pace.

The pickup in services activity showcases an economy that's firming after the Omicron variant slowed the sector's expansion early in the year. Last week's jobs report showed service-sector hiring continued at a solid pace in March, especially in the leisure and hospitality industry.

"There was an uptick in business activity in March, but respondents have indicated that they continue to be impacted by capacity constraints, logistical challenges and inflation," Anthony Nieves, chair of the ISM Services Business Survey Committee, said in a statement. "Labour shortages have eased slightly." Seventeen industries reported growth last month, led by educational services, entertainment and recreation, utilities and construction.

The ISM's measure of order backlogs rose to a four-month high while inventory sentiment dropped, indicating that service providers indicate their stockpiles are too low against a backdrop of resilient demand.

Such supply and demand imbalances are fuelling inflation. A measure of prices paid rose to 83.8, near the highest in the group's data back to 1997. After sizable advances last year, commodity prices remain elevated on supply concerns due to Russia's war in Ukraine. BLOOMBERG

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