The stock widened its rise with the news, with the Dow and S&P 500 closing at new records.
The report surveys businesses across the industry, from industries such as entertainment and recreation to real estate, construction and retail. Altogether, it represents a large part of the US economy: 88% of America’s gross domestic product, the broadest measure of economic activity, according to the ISM.
For March, the group’s index jumped to the highest level ever recorded: 63.7, easily exceeding economists’ expectations.
The survey series started in 2008 (although the underlying data dates back to 1997), and the previous peak was in October 2018. Any reading of an index above 50 means that the sector is expanding.
And this has been the trend: March marked the tenth consecutive month of growth in services, while the industry continues to recover from the pandemic shock.
“There is clearly a huge increase in activity going on,” said Paul Ashworth, chief economist at Capital Economics for the United States. “The fall in [Covid-19] the number of cases and the successful vaccination program allow the restrictions to be lifted, while the additional $ 1.9 trillion fiscal stimulus from Biden is overwhelming revenues. “
The volume of new orders, inventories and jobs increased in March, and prices in the sector also increased at a faster pace.
Comments on the report, which is based on surveys by purchasing managers, point to scarcity driving prices up, Ashworth said.
But not everything can be good news: “The comments also highlight growing problems with labor shortages, which suggests that rising inflation may not be as transitory as many [Federal Reserve] the authorities seem to believe it, “Ashworth said in a note to customers.
The Fed has repeatedly said that consumer price increases are expected over the summer, as pent-up demand loosens, but that these price increases will be temporary and do not pose a threat to the central bank’s ultra-low interest rates at this time.
Stock Rally
The US stock market gained momentum with positive service data, and all three major stock indices ended up bullish.