Service sector growth in the U.S. cooled off in March after a significant acceleration in the previous month, according to a report released by the Institute for Supply Management on Wednesday.
The ISM said its non-manufacturing index slid to 56.1 in March after jumping to 59.7 in February, although reading above 50 still indicates growth in the service sector.
Economists had expected the index to show a more modest pullback, with forecasts calling for the index to dip to 58.0.
“Respondents remain mostly optimistic about overall business conditions and the economy,” said Anthony Nieves, Chair of the ISM Non-Manufacturing Business Survey Committee. “They still have underlying concerns about employment resources and capacity constraints.”
The bigger than expected decrease by the headline index came as the business activity index tumbled to 57.4 in March from 64.7 in February and the new orders index slumped to 59.0 from 65.2.
On the other hand, the report said the employment index inched up to 55.9 in March from 55.2 in February, indicating a modest acceleration in the pace of job growth in the service sector.
The prices index also jumped to 58.7 in March after falling to 54.4 in the previous month, pointing to a significant reacceleration in the pace of price growth.
A separate report released by the ISM on Monday unexpected showed a faster rate of growth in U.S. manufacturing activity in the month of March.
The ISM said its purchasing managers index rose to 55.3 in March after falling to 54.2 in February, while economists had expected the index to come in unchanged.