US services firms grow at slowest pace in five months

WASHINGTON/LONDON • Service companies in the US expanded in March at the slowest pace in five months, adding to signs of tepid economic growth in the first quarter, a survey by the Institute for Supply Management (ISM) showed yesterday.

ISM'S non-manufacturing index eased to 55.2 (forecast was 57) from February's 57.6, which was the highest since 2015. Readings above 50 indicate growth.

The gauge of business activity fell to 58.9 from 63.6.

A disappointing start to the year for Americans' spending could be to blame for the drop in the ISM index, as softer consumption in the first quarter has been a common theme in the past three years.

While the figure remains above its 2016 average, the decline represents some easing, following the big gains in so-called soft data, such as surveys and confidence indicators, since Mr Donald Trump's election.

Services account for about 90 per cent of the economy and span industries such as utilities, retailing, healthcare and construction.

The decline in the services employment gauge is also a potentially negative indicator for tomorrow's payrolls report, which is forecast to show the United States added 175,000 jobs in March, following February's gain of 235,000.

Meanwhile, Britain's economy has probably slowed from its strong growth of late last year, and a cooling job market and hefty price gains will become increasingly apparent as Brexit gets underway, according to a poll published yesterday.

The Markit/CIPS Services PMI rose to a three-month high of 55.0 in March from 53.3 in February.

But some warning signals were flashing as the British government began the two-year process of leaving the European Union.

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A version of this article appeared in the print edition of The Straits Times on April 06, 2017, with the headline 'US services firms grow at slowest pace in five months'. Print Edition | Subscribe