The Institute for Supply Management said Friday that its service-sector index slowed to 52.5 in March from a reading of 57.3 in February. Any reading above 50 indicates the service sector, where most Americans work, is expanding. But with record layoffs over the past two weeks, economists believe services will fall into a contraction in April.
The March report said service industries were already showing signs of the impact of the virus. Reports from the health care sector found significant shortages of personal protective equipment, test swabs and other basic medical supplies.
“Extreme sourcing measures are required to procure necessary supplies for basic operations,” the ISM report said, quoting respondents to its survey. Anthony Nieves, chair of the survey committee for the ISM services report, said one factor that kept the index from sliding further in March was strength being seen in the government and health care parts of the index.
ISM reported on Wednesday that its manufacturing index did fall into contractionary territory in March with a reading of 49.1. Private economists said they were looking for the services index to slide into contraction territory probably with the April report.
“Conditions in both non-manufacturing and manufacturing are expected to weaken over coming months in response to virus-related shutdowns, supply chain disruptions as well as weak demand,” said Rubeela Farooqi, chief U.S. economist for High Frequency Economics.