The ISM non-manufacturing index has fallen to the weakest level since August 2017 with a reading of just 56.1 in March. The reading is below expectations and comes on the same day as a report indicating the beginnings of a labor market slowdown.
Key Takeaways
- The ISM non-manufacturing index dropped from 59.7 in February to 56.1 in March.
- The chairman of the ISM cited “underlying concerns about employment resources”.
- The reading is the worst since August 2017, below expectations of 58.
The ISM non-manufacturing index came in 3.6 percentage points lower than the previous month’s reading.
New orders dropped by 6.2 points last month to 59, while prices rose 4.3 points to 58.7. Business activity came in at 57.4, down 7.3, and Employment rose 0.7 points to 55.9. Prices have increased for 22 consecutive months as of March.
New orders are a key indicator of future performance, and while any reading above 50 still shows growth, the slowdown is concerning to many market analysts in the wider context of US and global economic performance. However, the ISM stated that survey respondents’ collective outlook remains positive overall.
US #ISM non-manufacturing slips to 56.1 in March: lowest in 19mo but still solid:
- Activity 57.4 despite -7.3pts from unrealistically high level
- Orders 59 despite -6.3pts
- Employment 55.9 (+0.7pt)
- Backlogs strong 56.5Back to the reality of cooling but still solid growth pic.twitter.com/Sgtdgs4Tts
— Gregory Daco (@GregDaco) April 3, 2019
Expert Outlook
“The non-manufacturing sector’s growth cooled off in March after strong growth in February,” said Anthony Nieves, chair of the Institute for Supply Management, in a statement. “Respondents remain mostly optimistic about overall business conditions and the economy. They still have underlying concerns about employment resources and capacity constraints.”
"The drop in the US ISM non-manufacturing index to the lowest level in nearly two years will underscore the impression that America's growth rate is decelerating," said Avery Shenfeld, senior economist at CIBC Capital Markets.
Market reaction
Gold has seen moderate buying pressure since the release of the ISM non-manufacturing index report and is inching into positive territory, up 0.005% and last trading at $1,290.06/oz with a high of $1,294.14/oz and a low of $1,288.62/oz.
Weak performance in labor and services could be strengthening the case for gold as a hedge or safe haven from the US dollar. US stocks trimmed gains and the Dow Jones Industrial Average sunk into negative territory for a brief period following the release of the report.
Gold Price Chart
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