U.S. service firms grow at slower pace in March

WASHINGTON • U.S. service companies expanded in March at a slower pace, dragged down by less growth in new orders and weaker hiring.

The Institute for Supply Management said Wednesday that its index of non-manufacturing activity fell to 54.4 last month from 56 in February. Any reading above 50 signals expansion. March's figure is the lowest in seven months.

The report measures growth in industries that employ 90 percent of the work force. Companies range from retail and construction to health care and financial services.

In March, companies kept adding jobs, but at a reduced pace. A gauge of hiring fell 3.9 points to 53.3, the lowest since November. That suggests Friday's government report on March employment could be much weaker than the previous four months, when job growth has averaged 200,000.

A separate survey Wednesday from payroll processor ADP showed private employers added just 158,000 jobs in March. That's down from February's gain of 237,000 reported by the survey.

Even with March's decline in the service-sector growth, the index nearly matched its 12-month average of 54.5. Anthony Nieves, chairman of the ISM's non-manufacturing survey committee, said most respondents are "positive about business conditions, however, there is an underlying concern regarding the uncertainty" of the economic outlook.

Fifteen of the 18 industries covered by the ISM survey reported expansion, including construction, transportation and warehousing, retail, finance and insurance, and utilities.

And other reports suggest consumers are still spending, despite an increase in Social Security taxes that has reduced take-home pay.

In February, consumer spending rose by the most in five months. And consumer confidence improved in March from the previous month, according to a survey released last week by the University of Michigan.

The housing recovery has also boosted home prices, which makes homeowners feel wealthier. That can also lead to more spending.