WASHINGTON (Reuters) - U.S. services sector activity slowed in March, held down by a drop in new orders, while private employers maintained a brisk pace of hiring.
The Institute for Supply Management (ISM) said on Wednesday its non-manufacturing activity index fell 0.7 point to a reading of 58.8 last month. A reading above 50 indicates expansion in the sector, which accounts for more than two-thirds of U.S. economic activity.
March's moderation in services industry activity reflected a 5.3 points decline the new orders subindex. The ISM's employment measure increased 1.6 points. There were also increases in the backlog of orders and import measures last month.
Separately, the ADP National Employment Report showed private payrolls increased by 241,000 jobs in March after rising 246,000 in February. Last month's increase beat economists' expectations for a 205,000 gain.
The ADP report, which is jointly developed with Moody's Analytics, was published ahead of the government's more comprehensive employment report for March due on Friday.
According to a Reuters survey of economists, nonfarm payrolls likely increased by 195,000 in March after surging 313,000 in February. The unemployment rate is forecast falling one-tenth of a percentage point to 4.0 percent in March.
U.S. financial markets were little moved by the data as investors fretted over escalating trade tensions between the United States and China. The dollar was trading lower against a basket of currencies. Stocks on Wall Street fell while prices for longer-dated U.S. Treasuries rose.
In a third report the Commerce Department said factory goods orders increased 1.2 percent in February amid strong demand for transportation equipment and a range of other products, nearly unwinding January's revised 1.3 percent decline. Orders surged 7.9 percent on a year-on-year basis in February.
Manufacturing, which accounts for about 12 percent of U.S. economic activity is being supported by strong domestic and global demand, but a shortage of skilled workers and capacity constraints could hurt factory output.
A survey on Monday showed a slight ebb in sentiment among manufacturers amid rising concerns over labor shortages and the supply chain. Manufacturers also reported that tariffs on steel and aluminum imports imposed by President Donald Trump in early March were raising prices, "causing panic buying" and "leading to inventory shortages for non-contract customers."
Trump imposed 25 percent tariffs on steel imports and 10 percent for aluminum to shield domestic industries from what he has described as unfair competition from other countries.
Orders for transportation equipment soared 7.0 percent, lifted by a 26.2 percent jump in the volatile orders for civilian aircraft. There were also increases in orders for machinery, which rose 1.2 percent after slipping 0.2 percent in January.
Orders for mining, oil field and gas field machinery climbed 1.8 percent. Orders for motor vehicles shot up 1.5 percent. Orders for electrical equipment, appliances and components surged 3.4 percent while bookings for computers vaulted 3.5 percent.
The department revised February orders for non-defense capital goods excluding aircraft, which are seen as a measure of business spending plans, to show them rising 1.4 percent instead of the 1.8 percent jump reported last month.
Orders for these so-called core capital goods fell 0.3 percent in January. Shipments of core capital goods, which are used to calculate business equipment spending in the gross domestic product report, increased 1.4 percent in February as reported last month.
Core capital goods shipments were unchanged in January.
(Reporting by Lucia Mutikani; Editing by Andrea Ricci)
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