06 April 2023
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US ISM services index slips in March

By Daniel Richards

The US ISM services index slipped to 51.2 in March, down from 55.1 in February and undershooting the consensus prediction of 54.4 in further evidence that some of the fizz is coming out of the US economy after a surprisingly resilient start to the year. The new orders subcomponent was particularly weak as it fell to 52.6, from 62.6 previously, suggesting a further slowdown in activity down the line. Meanwhile, the S&P Global services PMI for the US for March was revised down on the final reading to 52.6, from 53.8 previously. Other US data released yesterday was also suggestive of a slowing economy as the ADP employment change figure fell to 145,000 in March, down from 261,000 in February and missing the consensus prediction of 210,000, suggesting that the labour market could now be starting to feel the effect of the Fed’s cumulative rate hikes. All eyes will now be on the NFP jobs report due out tomorrow, where the net gain in March is predicted at 235,000.

German factory orders expanded 4.9% m/m in February, far higher than the predicted 0.3% expansion, and compares with the downwardly revised 0.5% growth in January, initially put at 1.0%. Germany’s services PMI survey was revised down modestly on the final print for March, now at 53.7, from 53.9 previously. The composite measure was kept at 52.6. The data from Germany has been stronger than had been anticipated at the start of the year, and expectations that Europe’s largest economy will contract this year have dissipated.

In other European data released yesterday, French industrial production surprised to the upside in February as it expanded 1.2%, beating expectations of 0.5% growth. The previous month’s contraction was revised to 1.4%, from 1.9% fall on the initial print. Manufacturing was up 1.3% m/m and 2/2% y/y. The final print of the March PMI for France was also released yesterday, with the headline composite number revised down to 52.7, from 54.0 previously. Services were at 53.9, from 55.5 initially.

Today’s Economic Data and Events

  • 08:30 India RBI repurchase rate. Forecast: 6.75%
  • 10:00 Germany industrial production, February, % m/m. Forecast: -0.1%
  • 16:30 US initial jobless claims, week to April 1. Forecast: 200,000

Fixed Income

  • Another soft set of data from the US helped to push US Treasuries higher, with a broad index of USTs gaining three days in a row this week. A steep slump in the services ISM and a miss on the ADP employment report helped to bring yields on the 2yr UST down by 5bps at 3.7798% while the 10yr UST yield dropped 3bps to 3.3108%. The slowdown in economic data will help shore up bets that the Fed will indeed start to pivot, particularly if we see a disappointing print from the NFP later this week.
  • European bonds also pulled higher with bund yields down 7bps to 2.176% while gilt yields were flat at 3.419%.
  • Saudi Arabia’s sovereign rating was raised to ‘A+’ from ‘A’ by Fitch and the outlook revised to stable from positive. The upgrade was down to improvements in Saudi Arabia’s fiscal and external balance sheets, according to Fitch.
  • Bahrain plans to sell two benchmark bonds, a USD 7yr and USD 12yr bond.
  • ADNOC is reportedly considering issuing USD bonds, according to press reports.


  • Currency markets swung back to the dollar after a few days of losses with the broad DXY index up 0.3% overnight. EURUSD dropped by about 0.5% to 1.0904 while GBPUSD slumped 0.3% to 1.2462. USDJPY continued to move in favour of the yen, however, down by 0.3% to 131.32.
  • Commodity currencies closed generally weaker. USDCAD ticked up by 0.1% to 1.3458 while AUDUSD fell 0.5% to 0.672. NZDUSD failed to hold on to early gains sparked by a larger than expected RBNZ hike, and settled the day only slightly higher at 0.6318.


  • Equity markets were weighed down by a series of weak data points in Europe and the US yesterday. In Europe, the downwards revision to PMI surveys set the tone, and the CAC and the DAX dropped 0.4% and 0.5% respectively. By contrast, the UK’s FTSE 100 ended the day 0.4% higher as sterling weakened.
  • In the US, the Dow Jones was the outlier, closing up 0.2%, while the S&P 500 (0.3%) and the NASDAQ (1.1%) both fell.
  • Locally, the ADX dropped 0.1% and the DFM 0.7%. The Tadawul ended the day 0.3% lower.


  • Oil prices traded sideways for much of the day yesterday with neither Brent or WTI showing any major material move. Both are down by about 0.6% in early trade today with Brent futures at USD 84.48/b and WTI at USD 80.13/b.
  • Commercial crude stocks dropped 3.7m bbl last week, according to data from the EIA. Gasoline and distillate stockpiles were also lower while oil production was flat.

Written By

Daniel Richards Senior Economist

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