“Even with the rebound, the two PMI surveys are merely consistent with annualised GDP growth of approximately 2.5% in the first quarter, largely unchanged on the disappointing 2.4% rate seen in the fourth quarter of last year.
At 55.5 in March, the headline seasonally adjusted Markit Flash U.S. Services PMI™ Business Activity Index picked up sharply from February’s four-month low (53.3). The latest ‘flash’ PMI reading, which is based on approximately 85% of usual monthly replies, was above the neutral 50.0 value for the fifth consecutive month and signalled a solid overall pace of output growth.
Nonetheless, reports from survey respondents suggested that stronger growth of business activity in March partly reflected a catch-up effect after disruptions related to extreme weather conditions during the previous month.
March data indicated the most marked reduction in outstanding business since October 2013. The decline in backlogs of work contrasted with a modest increase during February. Service providers attributed the renewed drop in unfinished business to weaker new order growth, as well as a lack of weather-related disruptions in the latest survey period.
Service sector new business growth eased for the third month running in March, and the latest expansion was the slowest for almost a year-and-a-half. Despite a loss of momentum in terms of new order gains, the latest survey signalled an upturn in service providers’ outlook for business activity over the next 12 months. Moreover, the degree of positive sentiment was higher than that recorded at the same time in 2013. Companies anticipating a rise in business activity generally commented on expectations of a gradual improvement in client demand.
The latest survey suggested that slower new business growth again weighed on job hiring, with service sector employment growth unchanged from the 11-month low registered during February. Net job creation at U.S. service providers has now been reported for just over four years, but the latest rise in staffing levels was weaker than seen on average over this period.
Latest data highlighted that cost inflation slowed for the seventh time in the past eight months during March. Although the latest survey still indicated a solid overall increase in input prices, the rate of inflation was the least marked since June 2013. Meanwhile, prices charged by service providers increased at a solid pace in March and the rate of inflation picked up from the five-month low registered during February.
The Markit Flash U.S. Composite PMI Output Index, which is based on original survey data from the Markit U.S. Services PMI and the Markit U.S. Manufacturing PMI, increased from 54.1 in February to 55.8 in March. This indicated that a faster expansion of service sector output more than offset a slowdown in manufacturing production growth in March. On average in the first quarter of 2014, the composite index posted 55.4, up slightly from 53.9 in the final quarter of 2013.