(Kitco News) - The health of the U.S. economy is becoming increasingly muddled as the service sector continues to lose momentum, according to the latest data from the Institute for Supply Management.
Wednesday, the ISM said its Services Purchasing Managers Index dropped to 51.4%, down from February’s reading of 52.6%. The data was weaker than expected, as economists were looking for a relatively unchanged reading of 52.8%.
Readings above 50% in such diffusion indexes signify economic growth and vice-versa. The farther an indicator is above or below 50%, the greater or smaller the rate of change.
“Twelve industries reported growth in March. The Services PMI, by being above 50 percent for the 15th consecutive month (after a single month of contraction in December 2022 and a prior 30-month period of expansion), continues to indicate sustained growth — but at a slower rate in March — for the sector,” said Anthony Nieves, Chair of the ISM Services Business Survey Committee, in the report.
“The decrease in the rate of growth in March and the decline in the composite index is a result of slower new orders growth, faster supplier deliveries, and a contraction in employment. The report continued to reflect growth month over month,” Nieves added.
The disappointing economic data is providing new momentum for the gold market as prices trade around $2,300 an ounce. June gold futures last traded at $2,299 an ounce, up 0.75% on the day.
While the headline number missed expectations, the components of the report provide a more nuanced picture. The New Orders Index dropped to 54.4%, down from the previous reading of 56.1%. At the same time, the Production Index rose to 57.4%, compared to February’s reading of 57.2%.
The service sector labor market remains in solid contraction territory even as conditions improved, with the Employment Index rising to 48.5%, up from 48%.
The drop in activity in the service sector comes two days after the ISM Manufacturing PMI beat expectations and rose into expansion territory for the first time since October 2022.
