March ISM services index rises, but still points to contraction

Posted Apr 3rd 2008 12:21PM by Joseph Lazzaro
Filed under: Economic Data

The U.S. services sector improved slightly in March 2008, but remained at levels indicating a contraction, the Institute of Supply Management announced Thursday.

The ISM Non-Manufacturing Index, which measures services, increased 0.3% to 49.6% in March 2008, a slight increase, but a reading still indicative of a contraction. Readings below 50% indicate a contraction; readings above it, expansion.

Economists surveyed by Bloomberg News had expected the ISM Non-Manufacturing Index to total 49.0% for March 2008. The index was at 49.3% in February 2008.

The new orders index increased 0.6% to 50.2%, while the employment index contracted for the third consecutive month, to 46.9%.

The prices index increased to 70.8% in March 2008, and also indicated a faster rate in price increases than in February 2008.

The employment index was flat compared to February 2008, but remains in contraction.

Further, the ISM said members' comments in March 2008 "are mixed and reflect concern about rising fuel and energy costs."

The ISM said 11 industries reported growth in March 2008: real estate, rental & leasing; mining; agriculture, forestry, fishing & hunting; construction; information; other services; utilities; retail trade; accommodation & food services; health care & social assistance; and public administration.

Meanwhile, 6 industries reported contraction in March 2008: transportation & warehousing; wholesale trade; educational services; finance & insurance; management of companies & support services; and professional, scientific & technical services.

Economic Analysis: A luke-warm March 2008 ISM services report. The positives include the 11 sectors that registered growth, but overall the services category remains in contraction; however, it's not falling off a cliff. The reading, just shy of 50, suggests that the services sector is not deteriorating rapidly: hence, to-date U.S. economic weakness remains largely a function of the housing sector's severe doldrums, and the accompanying mortgage / credit market concerns.

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