The U.S. services sector slowed more than expected in March as demand cooled, while a measure of prices paid by services businesses fell to the lowest in nearly three years, giving the Federal Reserve a boost in the fight against inflation, Reuters reported. There are also growing signs that the labor market is loosening, with other data showing private payrolls growth slowed considerably last month. This followed on the heels of news that job openings fell below 10 million at the end of February for first time in nearly two years. The Institute for Supply Management (ISM) said that its non-manufacturing PMI fell to 51.2 last month from 55.1 in February. A reading above 50 indicates growth in the services industry, which accounts for more than two-thirds of the economy. There was no mention of the financial markets turmoil, which has led to a tightening in credit conditions. Economists polled had forecast the non-manufacturing PMI decreasing to 54.5. Despite the pullback in growth in the services sector, Anthony Nieves, chair of the ISM Services Business Survey Committee noted that "the majority of respondents report a positive outlook on business conditions." The PMI remains above the 49.9 level which the ISM says over time indicates growth in the overall economy. Nevertheless, the softer-than-expected reading, coming on the heels of continued weakness in manufacturing activity last month, increases the risk of a recession this year. The ISM reported on Monday that its manufacturing PMI fell in March to the lowest level since May 2020. It was the first time since 2009 that all subcomponents of the manufacturing PMI fell below the 50 threshold. (Subscription required to view article.)
