Stocks extended their rally on the news, with the Dow and S&P 500 closing at new all-time highs.
The report examines companies across the industry, from industries like entertainment and recreation to real estate, construction and retail. All told, it represents a large portion of the U.S. 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 its all-time high of 63.7, far exceeding the expectations of economists.
The survey series began in 2008 (although the underlying data dates back to 1997), and the previous peak was in October 2018. Any index value above 50 means the industry is expanding.
And that’s the trend: March was the tenth consecutive month of growth in the services sector, as the sector continues to recover from the pandemic shock.
“There is clearly a big boom in activity underway,” said Paul Ashworth, chief US economist at Capital Economics. “The drop-in [Covid-19] number of cases and a successful vaccination program allow restrictions to be lifted, while Biden’s $ 1.9 trillion in additional fiscal stimulus is a huge boost to revenues. “
New orders, inventories and employment all rose in March and prices in the sector also rose at a faster pace.
The comments in the report, which is based on surveys of purchasing managers, point to shortages driving up prices, Ashworth said.
But it doesn’t have to be all great news: “The comments also point to growing labor shortages problems, suggesting that rising inflation may not be as short-lived as many people. [Federal Reserve] officials seem to believe it, ”Ashworth said in a note to customers.
The Fed has said repeatedly that summer consumer price hikes are expected when pent-up demand kicks off, but that these price jumps will be temporary and do not currently threaten ultra-low central bank interest rates.
Shares rallied
The US stock market was boosted by positive services data and all three major stock indices ended higher.