(Kitco News) – The U.S. service sector weakened significantly last month, with employment falling sharply, according to the latest data from the Institute for Supply Management (ISM).
The ISM announced on Thursday morning that its Services Purchasing Managers Index fell to 50.8 in March, down from February’s reading of 53.5. The data was significantly worse than expected, as economists were looking for a reading of 53.
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.
Gold prices spiked higher following the 10 am EDT release. Spot gold last traded at $3,115.63 for a loss of 0.60% on the daily chart.
The components of the report showed the sector worsening in some areas while improving in others. The New Orders Index fell to 50.4, down from 52.2 in February, and the Supplier Deliveries Index fell to 50.64 from 53.4 recorded the prior month. The Employment index declined sharply to 46.2 after posting a 53.9 reading the prior month.
At the same time, the Business Activity Index ticked up to 55.9, compared to February’s reading of 54.4. Inflation pressures also declined in the sector, but remained elevated, with the Prices Index coming in at 60.9, down from 62.6 in February.
“March saw drops in the readings of three (New Orders, Employment and Supplier Deliveries) of the four subindexes that directly factor into the Services PMI,” said Steve Miller, chair of the Institute for Supply Management Services Business Survey Committee. “Only Business Activity saw an increase over February’s reading. Employment was the only one of these subindexes to drop into contraction territory after three straight months with all four in expansion.”
“There has been a significant increase this month in the number of respondents reporting cost increases due to tariff activity,” Miller added. “Despite an increase in comments on tariff impacts and continuing concerns over potential tariffs and declining governmental spending, there was a close balance in near-term sentiment, between panelists with good outlooks and those seeing or expecting declines.”
