U.S. service sector growth continues to be solid in March, IHS PMI index falls to 54

U.S. service sector business activity saw a strong growth in March. The seasonally adjusted final IHS Markit U.S. Services Business Activity Index dropped to 54 in March from February’s 55.9. However, output growth was overall solid. Furthermore, the index average for initial three months of this year was widely consistent with the pace of growth seen over 2017 as a whole. Panelists largely attributed the rise in business activity to diversification and more favorable demand conditions.

New business received by service providers rose sharply in March, although at a slightly weaker pace than February’s 35-month high. Moreover, the pace of rise continued to be well above the long-run series average. Along with greater client demand, panelists linked the rise in new orders to marketing campaigns and rises in customer referrals.

Greater business requirements and a solid growth in output were influential factors for the latest rise in the levels of employment. Service providers recorded a solid job creation rate that was the most rapid since August 2017. For the 11th straight month, the level of outstanding business at service providers rose. The pace of accumulation dropped to a three-month low and was just marginal, with respondents implying the latest rise was because of ongoing growth in new business.

Meanwhile, the pace of input cost inflation weakened from multi-year high seen in February. However, cost burdens still rose at a solid rate. Several survey respondents stated that the rise in input prices stemmed from higher fuel and wage costs. Reflective of favorable demand conditions, grater cost burdens were greatly passed on to clients through higher charges.

The output price inflation pace decelerated a bit from February’s level but continued to be strong overall. Finally, forecasts for output in the year ahead moderated in March and fell below the series average. Positive sentiment was commonly attributed to greater client demand and favorable demand conditions.

At 14:00 GMT while the FxWirePro's Hourly Strength Index of US Dollar was neutral at - 12.5169. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

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