The numbers: The large service side of the U.S. economy surged in March as governments lifted businesses restrictions and rising vaccinations gave Americans more confidence to go out and shop, travel or take a vacation.
A survey of business leaders at service-oriented firms such as banks, retailers and restaurants jumped to 63.7% last month from 55.3% in February, the Institute for Supply Management said Monday.
That’s the highest level on record since the ISM began the survey in 1997. It doesn’t mean service-oriented companies are doing better than ever, just that the improvement between February and March was especially strong.
Readings above 50% signal that businesses are expanding, and numbers above 55% are a sign of broad strength.
A similar ISM survey of manufacturers also showed great strength in March as it posted a 38-year high.
What happened: All 18 services industries tracked by the ISM expanded in March — a rarity even in the best of times. New orders and production made big leaps as each index also hit the highest levels on record.
“Business is picking up as mandated restrictions seem to be easing and spring is right around the corner,” said a senior executive at a real estate company.
The gauge measuring new orders skyrocketed to 67.2% last month from 51.9% in February, when a bout of unusually severe winter weather in states such as Texas sapped the economy.
The production index also climbed nearly 14 points to 69.4%.
Employment also accelerated. The employment barometer jumped to 57.2% from 52.7% and reached a nearly two-year peak.
“[The] outlook remains cautiously optimistic for the second half of the year as businesses continue to open up and projects come online,” said a retail executive.
The chief worry remains an increase in prices tied to shortages of key supplies at a time when customer demand is rebounding in a big way. The price gauge moved up again to 74% from 71.8% and stayed at a 10-year high.
The ISM index tends to rise and fall with the broader economy.
Big Picture: The economy is catching fire again as coronavirus cases decline, the weather warms, federal stimulus floods into the economy. The U.S. added the most jobs in March since last fall and hiring is likely to strong in the months ahead so long as the coronavirus is kept at bay.