ISM March services index 51.4 vs 52.7 expected

• Prior was 52.6

Key details:

• Employment 48.5 vs 48.0 prior
• New orders 54.4 vs 56.1 last month
• Prices paid 53.4 vs 58.6 last month — lowest since March 2020

Other components:

• Inventories 45.6 vs 47.1 last month
• Supplier deliveries 45.4 versus 48.9 last month
• Backlog of orders 44.8 versus 50.3 last month
• New export orders 52.7 versus 51.6 last month.
• Imports 52.4 versus 54.3 last month
• Inventory sentiment 55.7 versus 56.7 last month

The drop in prices paid to the lowest since March 2020 is a bolt of lightning out of the blue. The market was just starting to panic about another round of inflation and then this happens.

There have been some big reaction in the market to the data with USD/JPY initially falling nearly 40 pips to 151.64 and 2-year yields erasing a 4 bps gain.

Fed pricing shows 69 bps in cuts this year vs 66 bps before the data.

Comments in the report:

• “The Red Sea turmoil is still not a notable challenge on supply for
  our sector, but we’re watching carefully for disruption risk. Also, the
  unrest in Haiti carries potential risk for the garment industry.”
  [Accommodation & Food Services]
• “Our market is shaping up to be the first normal year since the
  start of COVID-19. Volumes were down in 2022 and 2023. A price
  correction was made last year, setting up sales to move back to
  historical volumes.” [Agriculture, Forestry, Fishing & Hunting]
• “National business conditions remain strong in the industrial
  construction market. Labor is still tight across the country for skilled
  trades positions.” [Construction]
• “We are experiencing a budget shortfall, like many of our peers in
  higher education, so our spending will be down at the end of this fiscal
  year (June 30). Hiring is at a much slower pace as well, and we are
  still experiencing high employee turnover. Public opinion on the value
  of higher education compared to the cost is having an impact on our
  enrollment.” [Educational Services]
• “With the housing market continuing to stabilize, more mortgage
  inquiries are being made since my company opened up its mortgage loan
  program to loans other than Veterans Affairs loans.” [Finance &
  Insurance]
• “Continued inflationary pressure across multiple clinical device
  categories as contracts expire or are renewed.” [Health Care &
  Social Assistance]
• “Activity level holding steady for oil and gas.” [Mining]
• “Our company and industry continue to pull back to prepare for
  economic volatility in the second half of the year. Cost reduction
  initiatives remain a top-five company objective, even in a high-growth
  environment.” [Professional, Scientific & Technical Services]
• “Product supply chain is calm, and pricing steady. We are in slack
  time between seasons and use this time to prepare for spring/summer
  business. Challenges with employee retention in a few areas; however,
  turnover is only a few percent beyond target levels.” [Retail Trade]
• “Lead times and supply are improving, but several strategic items remain difficult to procure.” [Utilities]

This article was written by Adam Button at www.forexlive.com.