Tempe, AR, Apr. 5--The U.S. economy outside the manufacturing sector steamed forward in March, a private survey of businesses found, as hiring picked up and prices rose.
The Institute for Supply Management's survey of nonmanufacturing business activity climbed to 65.8 last month, its highest level since the group began tracking the data in 1997. The survey came in at 60.8 in February.
Economists polled by Dow Jones Newswires and CNBC had expected a reading of 61.4. Index readings above 50 indicate expansion of activity and prices in the non-manufacturing sector, while readings under 50 denote contraction.
The uptick in activity was broad, with 15 industry groups reporting growth. Only two reported contraction. Forty-two percent of respondents said that activity increased in March, while 10% reported that business had cooled.
"March's index indicates continued growth across almost all non-manufacturing industries," ISM said in a statement.
Economists at Bear Stearns, while noting the survey's young history, said in a research note that the report suggests the service sector continued to expand at a "very robust pace at the end of the first quarter."
The report's new-orders index climbed to 62.8 from 60.3 in February, while the employment index rose to 53.9 from 52.7, with eight of the 17 industry groups reporting new hiring. Inventories also increased after dropping off for the previous two months, though purchasing managers expressed a greater level of concern that inventories were too high.
But Ralph Kauffman, chairman of the survey committee, said after the release of the data that the increases in inventories for the most part appear to have been intentional. "Some of our respondents indicated that bottlenecks have lessened a bit, but that inventories are increasing in line with new orders."
Kauffman also noted that some businesses reported stocking up on goods--such as steel--that they believe are likely to be scarce in the months ahead.
Meantime, prices paid by businesses, a gauge of potential inflationary pressures in the economy, rose to a reading of 65.7 after registering a 57.3 mark in February. No industry group reported a decrease in prices.
The ISM non-manufacturing report followed a surprise increase in the ISM manufacturing index to 62.5 in March from 61.4 in February. The bond market, which is sensitive to signs of inflationary pressures, was particularly hurt by the increase in the price index to 86.0, the highest level since January 1995.
