By Lucia Mutikani
WASHINGTON, Apr 5 (Reuters) – A measure of U.S. service industry activity climbed to a record high in March amid robust new order growth, the latest sign that the economy is slowing down. being driven by an increase in vaccinations and a massive fiscal stimulus.
The optimistic survey released Monday by the Institute of Management and Supply (ISM) was added to Friday’s labor report, which showed the economy added 916,000 jobs last month, its highest number in seven months. Economic growth this year is expected to be the strongest in nearly four decades.
“The vigorous service activity in March paves the way for robust expansion in the second quarter,” said Oren Klachkin of Oxford Economics in New York. “All the right pieces for a faster recovery of services – expanded eligibility for vaccines, reopens and a historic fiscal expansion – are fitting.”
The ISM Non-Manufacturing Activity Index rebounded to a reading of 63.7 last month, also thanks to milder weather. It was the highest figure in the history of the poll and followed the 55.3 in February.
A reading above 50 indicates growth in the services sector, responsible for more than two-thirds of US economic activity. Economists polled by Reuters had expected the index to rise to 59.0 in March.
ISM said comments from service industries indicated that “the lifting of restrictions related to the COVID-19 pandemic unleashed a pent-up demand for many.”
However, he highlighted that “limitations in production capacity, material shortages, weather and challenges in logistics and human resources continue to cause disruptions in the supply chain.”
The poll added to a series of reports, ranging from manufacturing to consumer confidence and employment, suggesting that the vastly improved public health situation and the White House’s $ 1.9 trillion bailout package due to the COVID-19 pandemic are providing a powerful boost to the economy.
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ISM’s measure of new orders for the service industry rebounded to an all-time high of 67.2 in March, from a nine-month low of 51.9 hit in February.
Supply problems are driving up costs for businesses. The survey’s measure for prices paid by service industries jumped to 74 last month, its highest reading since July 2008, from 71.8 in February.
A separate Commerce Department report on Monday showed that new orders for US-made goods fell in February, likely downward pressure from the cold snap. Factory orders fell 0.8% after rising 2.7% in January.
Economists polled by Reuters expected a decline of 0.5% in February. Orders were up 1.0% on a year-over-year basis.
(Edited in Spanish by Carlos Serrano)