US service industry growth lowest in five months

Service sector activity in the US deteriorated more than expected in March, according to figures released on Wednesday.

The Institute for Supply Management's index of non-manufacturing activity fell to 55.2 from February's 57.6, missing expectations for a more modest drop to 57.0 and expanding at its slowest pace in five months.

Meanwhile, the non-manufacturing business activity index declined to 58.9 from 63.6, reflecting growth for the 92nd consecutive month, at a slower rate in March.

The new orders index printed at 58.9, down from 61.2 in February, while the employment index slipped 3.6 percentage points to 51.6 in March.

Pantheon Macroeconomics said: "The headline index usually moves quite closely in line with the rate of growth of core retail sales, but it has overshot in most months since the election, capturing the surge in business confidence evident in other surveys. The March reading, then, is the first undershoot since October, and it's very probably nothing to worry about."

It said the drop in the employment index to a seven-month low is more disconcerting, but might be due to Easter-related seasonal adjustment problems.