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US service sector grows more quickly in March on rising new orders, more hiring

WASHINGTON - U.S. service firms expanded more quickly last month as new orders rose and hiring increased, a positive sign the economy is rebounding after an unusually cold winter.

The Institute for Supply Management said Thursday that its service-sector index rose to 53.1 in March from 51.6 in February. Any reading above 50 indicates expansion.

The increase was driven by a big jump in a measure of hiring, which rose 6.1 points to 53.4. That reversed most of a nine-point plunge in February that was mostly blamed on the weather. The increase is a hopeful sign just before the government's employment report for March, to be released Friday. A gauge of new orders increased 2.1 points to 53.4.

Many companies that responded to the survey said that weather still weighed on their business, particularly earlier in the month. That suggests business could improve further in April.

"The economy is slowly recovering from the weather-induced freeze and we expect a further thawing during the spring," said Paul Dales, an economist at Capital Economics.

The survey covers businesses that employ 90 per cent of the workforce, including retail, construction, health care and financial services firms.

The ISM's survey adds to other evidence that the economy is picking up as the weather improves. Freezing temperatures and severe snowstorms in January and February had shut down factories, interrupted work at construction sites and cut into car sales as consumers remained at home.

But automakers said Tuesday that sales rose 6 per cent in March. That suggests Americans are willing to spend on big purchases, a hopeful sign for the broader economy.

And the ISM's separate survey of manufacturers, released Tuesday, rose to 53.7 last month. Factories cranked out more goods and new orders rose, the survey found. But manufacturers added jobs at a slower pace.

The number of Americans seeking unemployment aid rose last week but remained at close to pre-recession levels. The four week average of applications, a less volatile measure, stayed near a six-month low. That suggests companies are cutting fewer workers and may even be hiring more.

Still, service companies are growing at only a modest pace. The index has drifted downward after peaking at 57.9 in August.

Most economists expect growth slowed in the January-March quarter to a 1.5 per cent to 2 per cent annual rate. That would be slower than the fourth quarter's 2.6 per cent pace. But growth is expected to accelerate to nearly 3 per cent for the rest of the year, as hiring improves and Americans spend more.

The Canadian Press

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