March data pointed to a further increase in business activity across the U.S. service sector, and the rate of expansion accelerated from the snow-related four-month low seen during February. However, job creation remained only modest in March, partly reflecting a moderation in new business growth to its weakest for a year-and-a-half.
At 55.3 in March (55.5 flash), up from 53.3 in February, the Markit U.S. Services PMI™ Business Activity Index signalled a marked acceleration in service sector output growth following disruptions to business activity amid adverse weather conditions in the previous month. The index has posted above the 50.0 no-change value in each month since November 2013, but the latest reading was the second-lowest seen over this period.
Companies that reported an increase in business activity generally cited improving domestic economic conditions and efforts to work through backlogs that had been accumulated in February. As a result, latest data indicated a renewed reduction in volumes of outstanding business at service providers in March, and the rate of decline was the most marked since October 2013. Some firms noted that a lack of pressure on operating capacity had contributed to the drop in unfinished work in March.
Service providers pointed to a further rise in new business levels in March, but the rate of expansion eased for the third month running and was well below last December’s near two-year peak. Softer growth of incoming new orders contributed to another moderation in job creation during March.
Despite a sustained moderation in new business growth so far in 2014, service providers remain highly upbeat about the prospects for output growth at their units over the year ahead. The degree of positive sentiment picked up in March and was above the average seen since the survey began in late 2009.
Meanwhile, service sector cost inflation eased for the second successive month in March and was the least marked since April 2013. As a result, survey respondents indicated that output charge inflation was little-changed from the five-month low registered in February.
