U.S. economy expanded in March at slightly slower speed, ISM shows. Inflation cools a bit.

By Jeffry Bartash

ISM services index dips to 3-month low of 51.4%

Story developing. Stay tuned for updates here.

The numbers: A barometer of business conditions at service-oriented companies fell in March to a three-month low, but it still showed cooling inflation and the largest part of the U.S. economy in expansion mode.

The Institute for Supply Management's non-manufacturing survey slipped to 51.4% from 52.6% in the prior month. These companies, ranging from retail to recreation, dominate the modern U.S. economy.

Economists polled by the Wall Street Journal had predicted an ISM reading of 52.7%.

Still, numbers over 50% are viewed as positive for growth. The index hovered between 50% and 55% in 2023.

A similar ISM survey of manufacturers, meanwhile, turned positive in March for the first time in 17 months. That's added to the positive tenor.

Key details:

The production gauge inched up to 57.4%.The new-orders index dropped 1.7 points to 54.4%.The employment barometer increased 0.5 points to 48.5%.The prices-paid index, a measure of inflation, fell 5.2 points to 53.4%. It's the second-lowest reading since the pandemic.

Big picture: The economy has largely shrugged off the highest interest rates in 23 years and is growing at an above-average speed.

The economy could get more fuel to expand this year due to low unemployment and steady hiring - plus the likelihood that the Federal Reserve will trim interest rates.

Looking ahead: "The weaker than expected ISM services PMI is probably good news for the Federal Reserve, as it showed that the U.S. services economy, which has continued to make Fed officials second guess their potential rates move by midyear, has continued to weaken, slowly but surely," said chief economist Eugenio Aleman of Raymond James.

Market reaction: In Wednesday trades, the Dow Jones Industrial Average and S&P 500 partly rebounded after sharp losses on Tuesday. The decline in the prices-paid index helped fuel stock gains.

-Jeffry Bartash

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

04-03-24 1042ET

Copyright (c) 2024 Dow Jones & Company, Inc.