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U.S. Service Gauge Falls to 19-Month Low, Missing Estimates

A gauge of U.S. service industries fell in March by more than expected to the lowest level since mid-2017. 

U.S. Service Gauge Falls to 19-Month Low, Missing Estimates
Employees work at a factory in New York, U.S. (Photographer: Atisha Paulson/Bloomberg)

(Bloomberg) -- A gauge of U.S. service industries fell in March by more than expected to the lowest level since mid-2017 amid weaker business and new orders, adding to signs economic growth is cooling this year.

The Institute for Supply Management’s non-manufacturing index dropped to 56.1, according to a report Wednesday. That compared with the median estimate of 58 in a Bloomberg survey of economists. Three of four components fell, led by the largest drop in business activity in more than a decade.

U.S. Service Gauge Falls to 19-Month Low, Missing Estimates

Key Insights

  • The third decline in four months for the headline index may reflect forces weighing on companies including uncertainty over tariffs, slowing global growth and rising labor costs.
  • While the index is down from the 13-year high in September, it remains comfortably above 50 -- the dividing line between expansion and contraction -- suggesting the economy continues to grow but at a slower pace than last year.
  • A measure of export orders fell while the gauge of imports advanced for the first time in four months. That contrasts with ISM’s survey of manufacturers, in which both indexes fell last month.
  • The services employment gauge climbed, supporting estimates for a rebound in nonfarm payrolls in the Labor Department’s March jobs report due Friday. At the same time, a separate report Wednesday showed that service firms added the fewest jobs in four months in March.

Official’s View

“Respondents remain mostly optimistic about overall business conditions and the economy,” Anthony Nieves, chair of the non-manufacturing survey, said in a statement. “They still have underlying concerns about employment resources and capacity constraints.”

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  • A measure of supplier delivery times declined, signaling delays are easing, while a measure of backlogs increased.
  • The ISM index of manufacturers rebounded in March from a two-year low, according to a report Monday, as the employment gauge climbed by the most since 2015.
  • Sixteen of 18 non-manufacturing industries reported growth in March, with educational services and retail trade posting contractions.

--With assistance from Jordan Yadoo.

To contact the reporter on this story: Reade Pickert in Washington at epickert@bloomberg.net

To contact the editors responsible for this story: Scott Lanman at slanman@bloomberg.net, Jeff Kearns

©2019 Bloomberg L.P.