US services sector growth unexpectedly tumbled to its most anemic level in four years in March, while rising energy costs forced a jump in prices, according to a survey released this afternoon.
In the latest evidence of a rapidly slowing US economy, the Institute for Supply Management's index of non-manufacturing industries fell to 52.4 last month, its lowest since April, 2003, and down from 54.3 in February.
The service sector represents about 80 per cent of US economic activity, including everything from restaurants and hotels to banks and airlines.
February's reading on the index had already shown a sharp pullback, so most analysts were counting on a rebound. The result came as a surprise, however, coming in beneath even the most pessimistic estimate.
The stock market, fresh from a rally this week, pulled back on the news, while bond prices climbed.
Inflation fears were also rekindled with a huge spike in the survey's prices component to 63.3 from 53.8. This seemed counterintuitive given the moderation in activity, and reinforced rumblings about the possibility of a mild form of stagflation - a weak economy accompanied by rising costs.
News from the labor market was no better, with a measure of employment slipping to 50.8 from 52.2. New orders also eased, dipping to 53.8 from 54.8.