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The second shoe has dropped on the economic front. Thus, just two days after the Institute for Supply Management (ISM), the Arizona-based trade group, reported a notable slowing in manufacturing activity in March, with that metric's growth moderating from a reading of 54.2 in February to 51.3 last month, that same organization has issued data detailing that its companion survey on U.S. non-manufacturing activity had eased from 56.0 in February to 54.4 in March. A survey result of 55.8 had been the expectation.

Not only did the overall score show a lesser gain, but several components moderated as well. Specifically, new orders eased from a growth rate of 58.2 in February to 54.6 in March. Also gains in new export orders (56.5 versus 60.5), inventory sentiment (59.5 versus 62.5), prices (55.9 versus 61.7), and employment (53.3 versus 57.2) slowed as well.

Gaining in strength last month were supplier deliveries, which edged up from 51.5 to 53.0, and imports, which rose from a reading of 52.5 to 57.5. Backlogs, meantime, held steady at a mildly expansionary 54.5. It should be noted that a survey result north of 50.0 signals that the non-manufacturing, or services, sector is in expansion mode.

To put this data together each month, the ISM surveys more than 370 purchasing executives in more than 62 service sectors. The report is seasonally adjusted for most categories.

While this report did not show as much of a deceleration as the manufacturing survey, it was a greater indication of softness than generally forecast. Also, the 54.4 score was the lowest since last August, when this report had registered a reading of 54.3. On a brighter note, this increase in activity was the 39th successive monthly gain for the services sector and is consistent with the overall modest rate of economic improvement that we now see evolving in this country.         

In all, 15 broadly based non-manufacturing industries reported growth in March, led by construction, management, transportation, and accommodation and food services. Three industries--mining, healthcare, and agriculture--reported contracting levels of activity in March. On the whole, the group's respondents reported seeing some aggregate improvement in business activity, but some caution as well.

Taken as a whole, this report was a minor disappointment, but not as big a disquieting result as the data in manufacturing. All told, neither survey result was a game changer, and we still believe that GDP growth exceeded 2% in the just-completed first quarter.

At the time of this article's writing, the author did not have positions in any of the companies mentioned.