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Data released on Friday showed the ISM non-manufacturing index dropped in March just to 52.5, a reading significantly above expectations and still in expansion territory. Analysts at Wells Fargo, argue the index got a boost from delayed deliveries and that but business activity at 48.0 is a less-bad fall than many feared.

Key Quotes: 

“Part of the beat had to do with supplier deliveries. The longer the wait-time the higher this goes, as that is usually a sign of brisk business though now it reflects supply chain problems.

“Remarkably new orders at 52.9 are still rising for nonmanufacturing firms though that component did fall more than 10 points since February. Order backlogs are in expansion as well, even moving up slightly from February, though this too is apt to reflect supply chain disruption rather than a demand surge.”

“Imports and inventories both cratered during the month. In fact both measures fell 12.4 points to tie for the biggest decline.”