The headline indexes in all five of the District Bank surveys for the service sector took a nosedive in March from February. Some were more dramatic than others, but all were sudden and deep. Given the wide differences in the nature of the service sector across Districts and the variation in each survey’s composition, it is difficult to make inferences for the picture of non-manufacturing activity at the national level.
In general, the revenues index in the Richmond Fed Survey of the Service Sector tends to best signal overall conditions with a solid correlation to the ISM Non-Manufacturing Index (0.819). In March, the index fell to a scant expansion of 1 after 26 in February. The other four headline indexes of activity in the service sector fell well into contractionary territory. What all of them have in common is an abrupt reversal of conditions in the prior month.
An average of the five headlines results in a reading of -28.4 in March after 15.9 in February and an exceptional drop of 44.3 points. The average has a good correlation with the ISM measure (0.850).
The median forecast in the Bloomberg survey looks for the ISM Non-Manufacturing Index at 44.0 in March when the data is released on Friday, April 3 at 10:00 ET. This is a level that hasn’t been seen since the end of the recession in 2009. I would agree with the median expectation of a big drop from the 57.3 in February.
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