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First Cut: ISM Non-Manufacturing Index expands in March for a string of 122 straight months of expansion

Contrary to expectations, the ISM Non-Manufacturing Index remained in expansion in March at 52.5 after 57.3 in February. This extends the string of readings for growth to 122nd straight month. Survey respondents reported a variety of impacts from the pandemic from modest to severe. However, the composition of the index suggests a downward trajectory for the coming month that will moderate some of the positive impact of the March number. It is also similar to the direction of the ISM Manufacturing Index.

The component for business activity fell 9.8 points to 48.0, the first below 50 reading since 47.0 in July 2009, just as the economy was emerging from recession. The index for new orders declined 10.2 points to 52.9 in March, its lowest reading since 51.4 in August 2016. The index for employment was down 8.6 points to 47.0, its first sub-50 reading since 49.7 in May 2016 and the lowest since 45.1 in January 2010. Supplier delivery times widened to 62.1 in March, the second highest in the series since the 71.5 in August 1997. It was significantly more difficult to get goods and services along the pipeline in March. The subindex for order backlogs expanded for a second month at 55.0 in March after 53.2 in February that followed four months of contraction.

The detail  index for imports reflected the slowing in delivery times as it fell to 40.2 in March from 52.6 in February as supplies from abroad were relatively scarce. However, new export orders declined with the index at 45.9 after 55.6.

The index for prices paid was not much changed at 50.0 in March after 50.8 in February. Whatever moderation energy prices provided was largely offset by higher prices elsewhere.

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