A measure of U.S. services industry activity surged to a record high amid robust growth in new orders, in the latest indication of a roaring economy that is being boosted by increased vaccinations and massive fiscal stimulus.
The Institute for Supply Management (ISM) said on Monday its non-manufacturing activity index rebounded to a reading of 63.7 last month also lifted by warmer weather. That was the highest in the survey’s history and followed 55.3 in February.
A reading above 50 indicates growth in the services sector, which accounts for more than two-thirds of U.S. economic activity. Economists polled by Reuters had forecast the index rising to 59.0 in March.
The survey added to a raft of reports from manufacturing to consumer confidence and employment in suggesting that the vastly improved public health situation and the White House’s $1.9 trillion COVID-19 pandemic rescue package were providing a powerful tailwind to the economy.
The ISM reported last week that its measure of national manufacturing activity soared to its highest level in more than 37 years in March. Nonfarm payrolls jumped by 916,000 jobs in March, the most in seven months, the government said on Friday.
The services industry, hardest hit by the pandemic, could accelerate further. The U.S. Centers for Disease Control and Prevention said on Friday fully vaccinated people could safely travel at “low risk.”
The ISM survey’s measure of new orders for the services industry rebounded to an all-time high of 67.2 in March from a nine-month low of 51.9 in February.
But businesses continued to face supply constraints, which are raising costs for them. The survey’s measure of prices paid by services industries jumped to 74 last month, the highest reading since July 2008, from 71.8 in February.
The surge in these price measures have added to concerns of higher inflation this year. But some economists say they are not reliable predictors of future inflation. Price pressures are seen driven by the generous fiscal stimulus and extremely accommodative monetary policy.
The ISM survey’s measure of services industry employment shot up to 57.2 last month, the highest reading since May 2019, from 52.7 in February. That confirmed the sharp acceleration in private services industry employment in March.