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US Service Economy Accelerates in March, But Hiring Subdued: Markit

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The US service economy rebounded in March, but the pace of hiring remained subdued as new orders rose at the slowest pace since September 2012.

Markit Group’s gauge of US service activity rose from 53.3 to 55.3. The composite PMI index, which covers manufacturing and services, rose from 54.1 to 55.7. A reading above 50 signifies expansion in business activity, whereas a reading below that level indicates contraction.

The service economy rebounded sharply from February’s four-month low, as improving domestic demand resulted in a sharp increase in overall business activity. However, the pace of new business growth fell to its lowest level in a year-and-a-half, a sign the economy will need time to hit its stride after a weather-induced slowdown.

The slowdown in new business kept the pace of hiring subdued, Markit data showed. The employment sub-index fell from 51.9 to 51.8.

The slower pace of new business growth didn’t harm sentiment last month, as service providers remained highly upbeat about their prospects. The business expectations sub-index rose from 73.4 to 76.4.

“Service sector business activity rebounded in March after being hit by the adverse weather, and companies have grown more upbeat about the outlook,” said Markit chief economist Chris Williamson in a press release. “But hiring remained disappointingly subdued, suggesting firms are reluctant to expand capacity until they see firm evidence of stronger demand feeding through to their businesses.”

According to Williamson, March PMI data suggest the US economy expanded at an annual rate of 2.5 percent in the first quarter, while private sector payrolls expanded at a monthly rate of 130,000.

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