Non-manufacturing, which incorporates the all-important services sector, and which accounts for some two-thirds of aggregate economic activity across the country, improved during March, but at a somewhat lesser rate than had been forecast. The data were provided by the Institute for Supply Management, the Tempe, Arizona-based trade group.

All told, this survey result came in at 56.0. That was off from the 57.3 score tallied in February. It was also the lowest reading since the score of 53.0 last December. It should be noted that a reading above 50.0 signals that this key sector is expanding. Expectations had been that non-manufacturing would have come in a tad higher, at 57.0.

Breaking the series down to its individual components, we find that business activity and new orders both slowed their rate of increase last month, with the former scoring 58.9 down from 62.6, and the latter achieving an expansion rate of 48.8 off from the prior month's 61.2. Also, backlogs actually declined in March, tumbling to 49.5 from 53.0, while new export orders slowed its rate of growth, coming in at 52.5; in February that metric had totaled 54.5.

On the other hand, we saw increased strength in employment, which ticked up to 56.7 from 55.7 in February. This better employment number follows on the heels of a private-sector survey issued earlier this morning showing that 209,000 jobs were added in the non-government arena last month. On Friday, the U.S. Labor Department will issue its monthly survey on non-farm payrolls and unemployment. A payroll gain of about 210,000 is expected, while the jobless rate is forecast to have stayed the same at 8.3%.

Meanwhile, the ISM compiles its diffusion index by surveying more than 370 purchasing executives across a broad spectrum of the non-manufacturing business categories in the United States. Of the 18 industries tracked in this survey, 16 showed increases last month, a hearty percentage, suggesting that there remained a good deal of optimism across the non-manufacturing arena. 

Indeed, we saw generally positive comments from such disparate groups as wholesale and retail trade, arts and entertainment, professional, scientific, and technical services, and healthcare and social assistance.

In total, it was a good report, just not an especially strong one, suggesting that this was not a game-changing metric. Instead, it was consistent with our expectation that GDP growth improved by about 2.5% in the opening quarter. We think that this modest level of growth will be the rule in the current three months, and, quite possibly, through the final half of this year.     

At the time of this article’s writing, the author did not have positions in any of the companies mentioned.