The March ISM services index at 57.3 was 2.2 pts below expectations and down from a very high 59.7 in Feb. To put into perspective, 57 was the average in the previous expansion. Business Activity moderated to 59.7 from 66.9, the lowest since Oct. New Orders fell a touch while Backlogs rose 4 pts. Export Orders rose 2.5 pts to the best since Nov. Employment fell almost 2 pts to a 3 month low. Prices Paid fell slightly by 1.2 pts but remains high at 72.1. Of the 18 industries surveyed, 16 reported growth. Bottom line, the Japanese earthquake and rising commodity costs are the 2 main factors in the moderation, albeit at a still healthy level, as ISM specifically said “Respondents’ comments reflect concern about the recent natural disasters in Japan and the associated supply chain ramifications. Additionally, there is concern over rising costs, most notably for fuel and fuel products. Overall, most respondents remain confident about the direction of the economy.”
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