May 3 - The U.S. services sector contracted in March, while a measure of prices paid by businesses for inputs jumped, a worrisome sign for the outlook on inflation.
A reading above 50 indicates growth in the services industry, which accounts for more than two-thirds of the economy. The PMI adds to evidence that the economy is beginning to lose some steam after expanding at a solid pace.The slowdown in economic growth comes after 525 basis points worth of interest rate hikes from the Federal Reserve since March 2022 designed to quell elevated inflation.
A measure of new orders received by services businesses dipped to 52.2 last month from 54.4 in March, the lowest reading since last September. Production also faltered, with a gauge of business activity dropping to 50.9 from 57.4 in the prior month, to levels last seen at the onset of the COVID-19 pandemic in May 2020.
The survey's measure of services sector employment fell to 45.9 from 48.5 in March. Government data on Wednesday showed the labor market continues to gradually cool, with job openings falling to a three-year low in March and the number of people quitting their jobs declining. There were 1.32 job openings for every unemployed person in March compared to 1.36 in February.