Coronavirus: US services sector slows but data hides real slump
US service sector activity slowed to a three-and-a-half-year low in March, survey data has shown, although economists believe the real picture is much worse as coronavirus spreads rapidly through the country.
The ISM non-manufacturing purchasing managers’ index (PMI) fell to 52.5 in March from 57.3 in February. A score above 50 indicates expansion. Analysts had expected a fall to 44.
A separate PMI survey from data firm IHS Markit said US services sector activity plunged to the lowest since its records began ten years ago.
The better-than-expected reading on the ISM (Institute of Supply Management) gauge – which is more closely watched – was largely due to a severe delay in supplier deliveries.
Such a delay is usually associated with high demand and pushes the PMI up. But it was in fact caused by shortages in March.
US heading for deep recession
Economists say the US’s economy and its vast services sector are currently in recession. This analysis was backed up by a surge in unemployment in March, revealed in data today.
More than 700,000 Americans lost their jobs in March, the Department of Labor said. But analysts said April’s figures will be much worse as the economy will have been stunted by coronavirus lockdown measures.
Consultancy Oxford Economics said the April reading could show 20m Americans have become unemployed.
The IHS Markit survey said services sector output fell at the fastest rate since its survey began in 2009. Service firms also laid off workers at a record pace.
Chris Williamson, chief business economist at IHS Markit, said: “This decline will likely be eclipsed by what we see in the second quarter.”
“More non- essential businesses are being forced to close, some are going bust, and lockdowns are leading to vastly reduced consumer spending.”
IHS Markit said it now predicts the US economy will shrink by 5.5 per cent in 2020.