The dominant US services sector saw growth accelerate in March as worker shortages and Covid-19 cases eased, but firms continue to face supply challenges, according to an industry survey released Tuesday.
The Institute for Supply Management (ISM) said its services index rose 1.8 points to 58.3 percent, recovering from the slowdown seen in February and boosted by big jumps in new orders and employment.
The massive sector also saw an improvement in supplier deliveries and backlogs of orders, despite complaints of ongoing shortages of key materials and rising energy prices caused by the sanctions imposed on Russia following its invasion of Ukraine.
“There was an uptick in business activity in March, but respondents have indicated that they continue to be impacted by capacity constraints, logistical challenges and inflation,” the survey’s chair Anthony Nieves said.
“Labor shortages have eased slightly, as Covid-19 cases have declined and public-health restrictions have been relaxed.”
The increase marks 22 straight months of expansion, according to the survey, which showed 17 industries reporting growth, with agriculture the lone exception in slowing down.
However, “Geopolitical concerns — particularly the Russia/Ukraine war, which has impacted material costs, most notably fuel and chemical prices — have created uncertainty for many businesses,” Nieves said.
Amid the rapid recovery from the pandemic, the US economy has been plagued by shortages and rising prices as well as struggles to find workers.
Comments from survey respondents indicate ongoing issues, including rising prices and long lead times, which have impacted production in some cases and caused some firms to be more cautious about investments.
“Pricing pressures are stronger than ever due to the Russia-Ukraine (war), and energy costs are skyrocketing,” a construction firm said.
But despite the problems, an executive in the wholesale trade industry said, “Overall sales and profitability continue to be strong.”