US service economy rebounds in March, but has momentum been lost?
The US service economy rebounded in March, as businesses played catch-up after harsh weather triggered broad declines in output last month.
Markit Group’s gauge of US service activity rose from 53.3 to 55.5, according to a flash estimate released today. The median estimate of economists called for a reading of 54.2 A reading above 50.0 signifies expansion in the non-manufacturing sectors, whereas a reading below that level is a sign of contraction.
Service providers reported a solid expansion in overall output. Business activity expanded at a faster rate, as overall optimism continued to rise. However, new business growth slowed for the third consecutive month, a sign the service economy was losing momentum at the end of the first quarter.
The latest expansion in new business growth was the slowest in 16 months. Hiring plans were unchanged from February’s 11-month low, lowering the outlook for next week’s official non-farm payrolls report.
“Service sector activity rebounded in March after a weather-torn February, but the survey is clearly flashing some warning lights as to whether the economy has lost some underlying momentum and that growth could slow in the second quarter,” wrote Markit chief economist Chris Williamson in a press release.“The flash manufacturing and services PMIs are together signalling private sector payroll growth of a mere 130,000 per month.”
GDP growth in the first quarter is expected to have reached 2.5 percent, Williamson added, relatively unchanged from the 2.4 percent clip seen in the final three months of 2013. The Commerce Department is scheduled to post revised GDP figures Thursday.
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