US services activity picks up as Omicron headwinds ease

Services sector activity in the US strengthened last month despite widespread reports of rising prices and supply disruptions, as the headwinds from Covid-19 eased, the results of a closely-followed survey revealed.

The Institute for Supply Management's services sector Purchasing Managers' Index rose from the 56.5 point level for February to 58.3 in March.

Economists had penciled-in a reading of 58.6.

"We are still seeing raw material subcomponent shortages, transportation delays and price increases," said a purchasing manager from the Utilities sector.

They were echoed by another from the Retail space who told ISM: "Global supply chain issues continue to disrupt chip supply, which is suppressing production of new vehicles."

Despite that, gauges for new orders, employment, order backlogs and prices all moved higher.

As did the sub-index for prices paid, which increased from 83.1 to 83.8.

"In short, the survey confirms that spending on discretionary services is rebounding after the Omicron wave, echoing the message from a host of near-real-time indicators," said Ian Shepherdson, chief economist at Pantheon Macroeconomics.

"Inflation pressures remain intense, but they seem no longer to be intensifying."