US services sector activity slows sharply in March, ISM says

A closely followed gauge of services sector activity in the States slowed sharply last month.

The Institute for Supply Management's services sector Purchasing Managers' Index fell from a reading of 55.1 in February to 51.2 for March.

Economists had penciled in a reading of 54.5.

A sub-index for business activity held up well, slipping from 56.3 to just 55.4.

The sub-index for new orders on the other hand staged a very large drop, falling from 62.6 to 52.2.

In parallel, the sub-index for prices paid dropped from 65.5 to 52.8.

"The bulk of the decline in the March headline is in the new orders index, down 10.4 points to 52.2, suggesting that future demand—or the expectation of future demand— already is being crushed by the banking crisis," said Kieran Clancy, senior US economist at Pantheon Macroeconomics.

"That's asking a lot, but the trend clearly is slowing. Softer wage growth, in turn, will help to bring down inflation in core services ex-housing, making it more likely that the Fed starts to cut rates later this year."